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Macy’s, Inc. (M - Free Report) reported fourth-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Total revenues declined and earnings increased from the year-ago quarter’s reported figures. Comparable sales fell on an owned basis and an owned-plus-licensed basis.
Despite the challenges resulting from shifting consumer spending toward non-discretionary items, Macy's focus on offering new and relevant private and national brands helped it stay competitive. This period showcased the company's effective management and strategic initiatives, reflecting better-than-expected gross margins, SG&A and other revenues, alongside higher gains from asset sales. These adjustments and operational fortifications have positioned the company for sustainable growth and improved financial performance in the future.
Shares of Macy’s have gained 62.7% in the past six months compared with the industry’s 28.2% growth.
Macy’s, currently carrying a Zacks Rank #3 (Hold), reported adjusted earnings of $2.45 per share, surpassing the Zacks Consensus Estimate of $2.02 per share. Also, the bottom line increased from adjusted earnings of $1.88 per share in the year-ago period.
Net sales of $8,120 million beat the consensus estimate of $8,093 million. However, the top line dipped 1.7% from the year-ago quarter. Comparable sales fell 5.4% on an owned basis and 4.2% on an owned-plus-licensed basis from the prior-year quarter. We expected comparable sales to decline 6.2% on an owned basis and 6.3% on an owned-plus-licensed basis.
Macy’s digital sales dropped 4% year over year from the prior-year quarter. Brick-and-mortar sales were flat with the third quarter of 2022.
Net credit card revenues were $195 million, down 26% from the year-ago period. The metric represented 2.4% of sales, down 80 basis points from the year-ago quarter.
Image Source: Zacks Investment Research
Details by Brand
Comparable sales across Macy’s declined 6% year over year on an owned basis and 4.7% on an owned-plus-licensed basis. On a trailing 12-month basis, 41.2 million active customers shopped for the Macy’s brand.
The Macy's brand experienced growth in the beauty sector, especially in fragrances and high-end cosmetics, as well as its Backstage discount venture. However, there was ongoing weakness in women's footwear, along with a somewhat lackluster performance in cold-weather clothing and accessories.
At the Bloomingdale’s brand, comparable sales dropped 1.5% on an owned basis and 1.6% 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 the results. Men’s, home and designer handbags faced challenges.
Comparable sales at the Bluemercury brand rose 2.3% on an owned basis. About 711,000 active customers shopped the Bluemercury brand on a trailing 12-month basis. Strength in the skincare and color cosmetic categories drove the results.
Margins
The gross margin was 37.5% compared with our estimate of 36.5%. The metric increased from 34.1% in the prior-year quarter. Merchandise margins expanded 260 basis points on lower clearance markdowns. Delivery expenses, as a percentage of net sales, were 80 basis points lower than the year-ago period, mirroring improved inventory distribution and continuous supply-chain improvements.
The company reported selling, general and administrative (SG&A) expenses of $2,405 million, down from $2,456 million in the year-ago period. As a percentage of net sales, SG&A expenses increased 10 basis points year over year to 28.7% on lower sales. Our estimate for SG&A as a percentage of net sales was 30% for the quarter under review.
Macy’s reported an adjusted EBITDA of $1,168 million, up from an adjusted EBITDA of $910 million in the year-ago quarter. We note that the adjusted EBITDA margin was 14.4%, up 340 basis points year over year.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $1,034 million, long-term debt of $2,998 million and shareholders' equity of $4,137 million. M’s inventories were 2% up on a year-over-year basis.
In fiscal 2023, Macy’s provided cash from operating activities of $1,305 million.
A Peek Into Guidance
Macy's emphasized fiscal 2024 as a transition and investment year. The company is implementing the "A Bold New Chapter" strategy to accelerate financial improvement, and sustainable, profitable growth. This involves strengthening the Macy's brand for top-line growth, accelerating luxury growth, and simplifying and modernizing operations.
Net sales are projected to be $22.2-$22.9 billion, suggesting a decline from the $23.1 billion reported in fiscal 2023. Comparable owned-plus-licensed sales on a 52-week basis are expected between a 1.5% decrease and an increase of up to 1.5% from that reported in 2023.
The gross margin is anticipated to be 39.2-39.5% for the fiscal year. The adjusted EBITDA margin is estimated to be 8.5-8.9% of the total revenues. Adjusted earnings per share are envisioned to be $2.45-$2.85 for fiscal 2024, implying a decline from the $3.50 earned in the last fiscal year.
Macy's plans to close 150 underperforming locations by fiscal 2026, focusing investments on approximately 350 remaining stores to enhance customer experience and drive growth. The company expects low-single-digit comp growth and mid-single-digit adjusted EBITDA dollar growth beginning in fiscal 2025, aiming to return to the pre-pandemic levels of free cash flow.
Solid Retail Picks
Some better-ranked stocks from the same space are Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales indicates growth of 14.8% from the fiscal 2022 reported figure. ANF has a trailing four-quarter average earnings surprise of 713%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It flaunts a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 45.4% and 5%, respectively, from the fiscal 2022 reported figure. AEO has a trailing four-quarter average earnings surprise of 23%.
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company currently sports a Zacks Rank #1. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
The Zacks Consensus Estimate for Deckers Outdoor’ current fiscal-year earnings and sales indicates growth of 38.6% and 15.7%, respectively, from the fiscal 2023 reported figures.
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Macy's (M) Q4 Earnings Beat Estimates, Comp Sales Decline Y/Y
Macy’s, Inc. (M - Free Report) reported fourth-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Total revenues declined and earnings increased from the year-ago quarter’s reported figures. Comparable sales fell on an owned basis and an owned-plus-licensed basis.
Despite the challenges resulting from shifting consumer spending toward non-discretionary items, Macy's focus on offering new and relevant private and national brands helped it stay competitive. This period showcased the company's effective management and strategic initiatives, reflecting better-than-expected gross margins, SG&A and other revenues, alongside higher gains from asset sales. These adjustments and operational fortifications have positioned the company for sustainable growth and improved financial performance in the future.
Shares of Macy’s have gained 62.7% in the past six months compared with the industry’s 28.2% growth.
Macy's, Inc. Price, Consensus and EPS Surprise
Macy's, Inc. price-consensus-eps-surprise-chart | Macy's, Inc. Quote
Sales & Earnings Picture
Macy’s, currently carrying a Zacks Rank #3 (Hold), reported adjusted earnings of $2.45 per share, surpassing the Zacks Consensus Estimate of $2.02 per share. Also, the bottom line increased from adjusted earnings of $1.88 per share in the year-ago period.
Net sales of $8,120 million beat the consensus estimate of $8,093 million. However, the top line dipped 1.7% from the year-ago quarter. Comparable sales fell 5.4% on an owned basis and 4.2% on an owned-plus-licensed basis from the prior-year quarter. We expected comparable sales to decline 6.2% on an owned basis and 6.3% on an owned-plus-licensed basis.
Macy’s digital sales dropped 4% year over year from the prior-year quarter. Brick-and-mortar sales were flat with the third quarter of 2022.
Net credit card revenues were $195 million, down 26% from the year-ago period. The metric represented 2.4% of sales, down 80 basis points from the year-ago quarter.
Image Source: Zacks Investment Research
Details by Brand
Comparable sales across Macy’s declined 6% year over year on an owned basis and 4.7% on an owned-plus-licensed basis. On a trailing 12-month basis, 41.2 million active customers shopped for the Macy’s brand.
The Macy's brand experienced growth in the beauty sector, especially in fragrances and high-end cosmetics, as well as its Backstage discount venture. However, there was ongoing weakness in women's footwear, along with a somewhat lackluster performance in cold-weather clothing and accessories.
At the Bloomingdale’s brand, comparable sales dropped 1.5% on an owned basis and 1.6% 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 the results. Men’s, home and designer handbags faced challenges.
Comparable sales at the Bluemercury brand rose 2.3% on an owned basis. About 711,000 active customers shopped the Bluemercury brand on a trailing 12-month basis. Strength in the skincare and color cosmetic categories drove the results.
Margins
The gross margin was 37.5% compared with our estimate of 36.5%. The metric increased from 34.1% in the prior-year quarter. Merchandise margins expanded 260 basis points on lower clearance markdowns. Delivery expenses, as a percentage of net sales, were 80 basis points lower than the year-ago period, mirroring improved inventory distribution and continuous supply-chain improvements.
The company reported selling, general and administrative (SG&A) expenses of $2,405 million, down from $2,456 million in the year-ago period. As a percentage of net sales, SG&A expenses increased 10 basis points year over year to 28.7% on lower sales. Our estimate for SG&A as a percentage of net sales was 30% for the quarter under review.
Macy’s reported an adjusted EBITDA of $1,168 million, up from an adjusted EBITDA of $910 million in the year-ago quarter. We note that the adjusted EBITDA margin was 14.4%, up 340 basis points year over year.
Other Financial Aspects
Macy’s ended the quarter with cash and cash equivalents of $1,034 million, long-term debt of $2,998 million and shareholders' equity of $4,137 million. M’s inventories were 2% up on a year-over-year basis.
In fiscal 2023, Macy’s provided cash from operating activities of $1,305 million.
A Peek Into Guidance
Macy's emphasized fiscal 2024 as a transition and investment year. The company is implementing the "A Bold New Chapter" strategy to accelerate financial improvement, and sustainable, profitable growth. This involves strengthening the Macy's brand for top-line growth, accelerating luxury growth, and simplifying and modernizing operations.
Net sales are projected to be $22.2-$22.9 billion, suggesting a decline from the $23.1 billion reported in fiscal 2023. Comparable owned-plus-licensed sales on a 52-week basis are expected between a 1.5% decrease and an increase of up to 1.5% from that reported in 2023.
The gross margin is anticipated to be 39.2-39.5% for the fiscal year. The adjusted EBITDA margin is estimated to be 8.5-8.9% of the total revenues. Adjusted earnings per share are envisioned to be $2.45-$2.85 for fiscal 2024, implying a decline from the $3.50 earned in the last fiscal year.
Macy's plans to close 150 underperforming locations by fiscal 2026, focusing investments on approximately 350 remaining stores to enhance customer experience and drive growth. The company expects low-single-digit comp growth and mid-single-digit adjusted EBITDA dollar growth beginning in fiscal 2025, aiming to return to the pre-pandemic levels of free cash flow.
Solid Retail Picks
Some better-ranked stocks from the same space are Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company 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 Abercrombie & Fitch’s current fiscal-year sales indicates growth of 14.8% from the fiscal 2022 reported figure. ANF has a trailing four-quarter average earnings surprise of 713%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It flaunts a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 45.4% and 5%, respectively, from the fiscal 2022 reported figure. AEO has a trailing four-quarter average earnings surprise of 23%.
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company currently sports a Zacks Rank #1. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
The Zacks Consensus Estimate for Deckers Outdoor’ current fiscal-year earnings and sales indicates growth of 38.6% and 15.7%, respectively, from the fiscal 2023 reported figures.