Macy’s reports another drop in sales, but sees ‘traction’ in recovery

Macy’s reported that its U.S. comparable-store sales fell 1.2 percent from the year-ago quarter. The retailer has not reported an increase in sales since the first quarter of 2022. It reported a first-quarter profit of $62 million, less than half of what it achieved in the same quarter last year.

Sales of Macy’s namesake brand were the weakest of all the company’s brands, falling 1.6%. Sales at Bloomingdale’s increased 0.8% and sales at Bluemercury increased 4.3%.

Macy’s slightly raised the low end of its sales forecast to $22.3 billion for the year, up from the $22.2 billion expected in February. It also raised its profit forecast slightly.

The company’s shares rose in premarket trading and have been roughly flat this year.

David Swartz, senior equity analyst at Morningstar, saw worrying signs in the details of Macy’s earnings. Credit card revenue fell $45 million to $117 million in the first quarter, which the company attributed to higher delinquency rates.

“This suggests that your customers are buying things with Macy’s credit cards that they actually can’t afford because they aren’t paying their credit card bills on time or maybe not at all,” Swartz said. “That doesn’t give a lot of confidence that their customers are in very good financial shape right now.”

According to the Census Bureau, non-inflation-adjusted retail sales increased just over 3 percent in the first four months of the year, compared with the previous year. But department store sales fell 2.4% in that period.

Macy’s is undergoing a major overhaul that includes closing 150 stores over the next three years. After the reduction, Macy’s expects to have 350 stores, just over half the number it had before the pandemic.

Tony Spring, who became Macy’s chief executive in February, is overseeing the restructuring. Macy’s has begun to distinguish between the stores it plans to keep and the ones it will close. In the first quarter, it said 50 stores that represent the company’s future, based on geography, staffing and other factors, saw a comparable sales increase of 3.3 percent.

In a statement released Tuesday, Spring said the performance of these stores was a “leading indicator” of what the remaining fleet would look like after the stores closed.

“While it is still early days, our investments in product, presentation and experience are gaining momentum and reinforcing our belief that long-term Macy’s Inc. can return to sustainable, profitable growth,” he said.

Spring is also dealing with pressure from a group of activist investors who believe the company is not doing enough to transform its business. In December, the group offered to acquire Macy’s and take it private, which the retailer rejected. In March, the group increased its offer and valued the company at US$6.6 billion, a premium to the company’s current market value.

Macy’s board said it would review the proposal. Last month, Macy’s named two independent directors proposed by activists as part of a deal to avoid a broader proxy battle.