Macy’s full year cuts forecast despite strong quarter, fear shoppers will pull back on spending

Macy’s on Tuesday lowered its full-year forecast, saying it expects deteriorating consumer spending on discretionary items such as apparel that will force the supermarket chain to use big cuts to take goods off the shelves.

The warning comes even as the retailer reported second-quarter earnings and fiscal revenue that beat analysts’ expectations.

Macy’s now expects fiscal revenue for 2022 to range from $24.34 billion to $24.58 billion, down from previous estimates of $24.46 billion to $24.7 billion. It puts its adjusted annual earnings per share in the range of $4.00 to $4.20, down from the previous guidance of $4.53 to $4.95. Wall Street analysts were looking for full-year guidance of $24.36 billion and $4.51 per share, according to Refinitiv’s consensus estimates.

“We expect to emerge from this uncertain period in a strong position with a healthy balance sheet,” CEO Jeff Jennett said in a statement.

Here’s how Macy’s performed in the second quarter of the fiscal year compared to what analysts had been expecting, based on Refinitiv estimates:

• Earnings per share: 1 dollar vs. 85 cents expected
• he won: $5.6 billion vs. $5.49 billion expected

Net income for the three months ended July 30 fell to $275 million, or 99 cents a share, from $345 million, or $1.08 a share, a year earlier.

Net sales decreased slightly to $5.6 billion from $5.65 billion a year earlier.

Macy’s comparable sales on a owned and licensed basis were down 1.6% from the previous year. Analysts had been eyeing a 2% drop, according to Refinitiv.

Macy’s said digital sales were down 5% from a year earlier but still 37% higher than pre-pandemic levels. E-commerce revenue made up 30% of total sales.

Jeanette said that Macy’s so-called Polaris turnaround plans, which included store closures and investments in its digital operations, made the company faster and more resilient. This was “necessary to overcome rapidly changing consumer trends and macro conditions,” he said.

However, Macy’s cannot escape changing consumer behavior amid decades of high inflation.

Macy’s reported inventory levels in the second quarter, up 7% from the previous year’s levels. The supermarket chain said it was targeting “appropriate” stock levels by the end of the year.

It said it is using price cuts to remove outdated inventory in seasonal goods, private-brand merchandise and pandemic-related categories such as activewear, sleepwear and household goods.

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