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Macy’s, Inc. (M - Free Report) reported third-quarter fiscal 2023 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics declined from the respective year-ago fiscal quarter’s reported figures. Comparable sales fell on an owned basis and an owned-plus-licensed basis.
Shares of Macy’s have lost 16.1% in the past three months compared with the industry’s 7.9% decline.
Sales & Earnings Picture
Macy’s, currently carrying a Zacks Rank #3 (Hold), reported adjusted earnings of 21 cents per share, surpassing the Zacks Consensus Estimate of breakeven earnings. However, the bottom line declined from the adjusted earnings of 52 cents per share reported in the year-ago fiscal period.
Total revenues of $5,038 million came ahead of the consensus estimate of $4,772 million. The top line dipped 7% from the year-ago fiscal quarter’s reported figure. Comparable sales fell 7% on an owned basis and 6.3% on an owned-plus-licensed basis from the prior-year fiscal quarter’s figure. We expected comparable sales to decline 8.5% on an owned basis and 8.2% on an owned-plus-licensed basis.
Macy’s digital sales dropped 7% from the prior-year fiscal quarter’s level. Brick-and-mortar sales decreased 7% versus the third quarter of 2022.
Net credit card revenues were $142 million, up 31.1% from the year-ago fiscal period’s level. The metric represented 2.9% of sales, down 100 basis points from the year-ago fiscal quarter’s figure.
Details by Brand
Comparable sales across Macy’s declined 7.6% on an owned basis and 6.7% on an owned-plus-licensed basis. On a trailing 12-month basis, 41.3 million active customers shopped the Macy’s brand. Star Rewards program members accounted for roughly 72% of the overall Macy's brand-owned-plus-licensed sales. Strength in beauty, mainly fragrances and prestige cosmetics, men’s tailored, women’s career sportswear and off-price with Backstage aided results. Women’s casual sportswear, big-ticket and handbags were soft.
At the Bloomingdale’s brand, comparable sales dropped 3.2% on an owned basis and 4.4% on an owned-plus-licensed basis. Management informed that 4 million active customers shopped the Bloomingdale’s brand on a trailing 12-month basis. Under the Bloomingdale’s banner, strength in beauty, shoes, women’s contemporary apparel and its outlet locations drove results. Men’s, home and designer handbags remained challenged.
Comparable sales at the Bluemercury brand were up 2.5% on an owned basis. About 683,000 active customers shopped the Bluemercury brand on a trailing 12-month basis. Strength in the skincare and color cosmetic categories drove results.
Margins
The gross margin was 40.3% compared with our estimate of 40.2%. The metric increased from 38.7% reported in the prior-year fiscal quarter. Merchandise margins expanded 110 basis points on lower permanent markdowns within the Macy’s brand and improved freight expenses, partly offset by planned changes in Macy’s category mix. Delivery expenses, as a percentage of net sales, were 50 basis points lower than the year-ago fiscal period on improvements in merchandise allocation from reductions in packages per order and distance traveled.
As a percentage of net sales, selling, general & administrative (SG&A) expenses increased 230 basis points year over year to 40.5% on lower sales. Our estimate for SG&A as a percentage of net sales was 41.3% for the quarter under review.
Macy’s reported an adjusted EBITDA of $334 million, down from an adjusted EBITDA of $439 million in the year-ago fiscal quarter.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $364 million, long-term debt of $2,997 million and shareholders' equity of $4,144 million. M’s inventories were 6% lower on a year-over-year basis.
During the nine months of fiscal 2023, Macy’s provided cash from operating activities of $158 million.
A Peek Into Guidance
Management revised fiscal 2023 sales and earnings view including third-quarter results. The outlook reflects the risks related to the uncertain macroeconomic climate along with pressures on consumers and flexibility to respond to the intra-quarter demand trends. Net sales are projected to be $22.9-$23.2 billion versus the previous forecast of $22.8-$23.2 billion. Comparable owned plus licensed sales on a 52-week basis are still expected to decline 6-7% year over year. Digital sales are expected to be about one-third of net sales.
For fiscal 2023, it expects the gross margin to be in the band of 38.4% to 38.5%, while net interest expense is projected to be $140 million. It anticipates SG&A expenses of 35.2-35.5% of the total revenues and 8.9-9.1% for the fiscal year. The guidance consists of $200 million in cost savings, 30% in the gross margin and the rest in SG&A expenses. Adjusted earnings per share continue to be envisioned in the range of $2.88-$3.13 for the fiscal year compared with the earlier view of $2.70-$3.20 and down from earnings of $4.48 per share earned in the last fiscal year. Capital expenditures are envisioned to be about $950 million for the fiscal year.
For the fourth quarter of fiscal 2023, management anticipates net sales to be in the band of $7.95 billion to $8.25 billion. It expects the gross margin to improve by at least 220 basis points year over year. For the quarter, the bottom line is envisioned to be in the range of $1.85-$2.10 per share. Inventories are expected to be nearly flat on a percentage basis year over year.
Solid Picks in Retail
We have highlighted three better-ranked stocks, namely American Eagle Outfitters (AEO - Free Report) , Abercrombie & Fitch (ANF - Free Report) and Boot Barn (BOOT - Free Report) .
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year earnings per share suggests growth of 33% from the year-ago reported figure. AEO delivered an average trailing four-quarter earnings surprise of 43.2%.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank of 1. ANF has delivered an earnings surprise of 724.8% in the last four quarters. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10% from the year-ago reported figures.
Boot Barn, a leading apparel and footwear retailer, currently carries a Zacks Rank #2 (Buy). BOOT delivered an average trailing four-quarter earnings surprise of 13.5%.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 7.8% from the year-ago reported figure.
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Macy's (M) Q3 Earnings Beat Estimates, Comp Sales Decline
Macy’s, Inc. (M - Free Report) reported third-quarter fiscal 2023 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics declined from the respective year-ago fiscal quarter’s reported figures. Comparable sales fell on an owned basis and an owned-plus-licensed basis.
Shares of Macy’s have lost 16.1% in the past three months compared with the industry’s 7.9% decline.
Sales & Earnings Picture
Macy’s, currently carrying a Zacks Rank #3 (Hold), reported adjusted earnings of 21 cents per share, surpassing the Zacks Consensus Estimate of breakeven earnings. However, the bottom line declined from the adjusted earnings of 52 cents per share reported in the year-ago fiscal period.
Total revenues of $5,038 million came ahead of the consensus estimate of $4,772 million. The top line dipped 7% from the year-ago fiscal quarter’s reported figure. Comparable sales fell 7% on an owned basis and 6.3% on an owned-plus-licensed basis from the prior-year fiscal quarter’s figure. We expected comparable sales to decline 8.5% on an owned basis and 8.2% on an owned-plus-licensed basis.
Macy's, Inc. Price, Consensus and EPS Surprise
Macy's, Inc. price-consensus-eps-surprise-chart | Macy's, Inc. Quote
Macy’s digital sales dropped 7% from the prior-year fiscal quarter’s level. Brick-and-mortar sales decreased 7% versus the third quarter of 2022.
Net credit card revenues were $142 million, up 31.1% from the year-ago fiscal period’s level. The metric represented 2.9% of sales, down 100 basis points from the year-ago fiscal quarter’s figure.
Details by Brand
Comparable sales across Macy’s declined 7.6% on an owned basis and 6.7% on an owned-plus-licensed basis. On a trailing 12-month basis, 41.3 million active customers shopped the Macy’s brand. Star Rewards program members accounted for roughly 72% of the overall Macy's brand-owned-plus-licensed sales. Strength in beauty, mainly fragrances and prestige cosmetics, men’s tailored, women’s career sportswear and off-price with Backstage aided results. Women’s casual sportswear, big-ticket and handbags were soft.
At the Bloomingdale’s brand, comparable sales dropped 3.2% on an owned basis and 4.4% on an owned-plus-licensed basis. Management informed that 4 million active customers shopped the Bloomingdale’s brand on a trailing 12-month basis. Under the Bloomingdale’s banner, strength in beauty, shoes, women’s contemporary apparel and its outlet locations drove results. Men’s, home and designer handbags remained challenged.
Comparable sales at the Bluemercury brand were up 2.5% on an owned basis. About 683,000 active customers shopped the Bluemercury brand on a trailing 12-month basis. Strength in the skincare and color cosmetic categories drove results.
Margins
The gross margin was 40.3% compared with our estimate of 40.2%. The metric increased from 38.7% reported in the prior-year fiscal quarter. Merchandise margins expanded 110 basis points on lower permanent markdowns within the Macy’s brand and improved freight expenses, partly offset by planned changes in Macy’s category mix. Delivery expenses, as a percentage of net sales, were 50 basis points lower than the year-ago fiscal period on improvements in merchandise allocation from reductions in packages per order and distance traveled.
As a percentage of net sales, selling, general & administrative (SG&A) expenses increased 230 basis points year over year to 40.5% on lower sales. Our estimate for SG&A as a percentage of net sales was 41.3% for the quarter under review.
Macy’s reported an adjusted EBITDA of $334 million, down from an adjusted EBITDA of $439 million in the year-ago fiscal quarter.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $364 million, long-term debt of $2,997 million and shareholders' equity of $4,144 million. M’s inventories were 6% lower on a year-over-year basis.
During the nine months of fiscal 2023, Macy’s provided cash from operating activities of $158 million.
A Peek Into Guidance
Management revised fiscal 2023 sales and earnings view including third-quarter results. The outlook reflects the risks related to the uncertain macroeconomic climate along with pressures on consumers and flexibility to respond to the intra-quarter demand trends. Net sales are projected to be $22.9-$23.2 billion versus the previous forecast of $22.8-$23.2 billion. Comparable owned plus licensed sales on a 52-week basis are still expected to decline 6-7% year over year. Digital sales are expected to be about one-third of net sales.
For fiscal 2023, it expects the gross margin to be in the band of 38.4% to 38.5%, while net interest expense is projected to be $140 million. It anticipates SG&A expenses of 35.2-35.5% of the total revenues and 8.9-9.1% for the fiscal year. The guidance consists of $200 million in cost savings, 30% in the gross margin and the rest in SG&A expenses. Adjusted earnings per share continue to be envisioned in the range of $2.88-$3.13 for the fiscal year compared with the earlier view of $2.70-$3.20 and down from earnings of $4.48 per share earned in the last fiscal year. Capital expenditures are envisioned to be about $950 million for the fiscal year.
For the fourth quarter of fiscal 2023, management anticipates net sales to be in the band of $7.95 billion to $8.25 billion. It expects the gross margin to improve by at least 220 basis points year over year. For the quarter, the bottom line is envisioned to be in the range of $1.85-$2.10 per share. Inventories are expected to be nearly flat on a percentage basis year over year.
Solid Picks in Retail
We have highlighted three better-ranked stocks, namely American Eagle Outfitters (AEO - Free Report) , Abercrombie & Fitch (ANF - Free Report) and Boot Barn (BOOT - Free Report) .
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year earnings per share suggests growth of 33% from the year-ago reported figure. AEO delivered an average trailing four-quarter earnings surprise of 43.2%.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank of 1. ANF has delivered an earnings surprise of 724.8% in the last four quarters. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10% from the year-ago reported figures.
Boot Barn, a leading apparel and footwear retailer, currently carries a Zacks Rank #2 (Buy). BOOT delivered an average trailing four-quarter earnings surprise of 13.5%.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 7.8% from the year-ago reported figure.