Macy's has once again delivered a mixed bag of results, as investors closely monitor how quickly CEO Tony Spring can steer the company toward a successful turnaround. This comes at a time when an activist investor is pushing to take the retail chain private. The latest results, which encompass the Macy's brand, Bloomingdale's, and Blue Mercury, indicate that comparable sales during the crucial holiday quarter dipped by 1.1%. However, there was a slight silver lining, as comparable sales from its owned and licensed businesses, as well as its online marketplace, improved by 0.2%. This marks the highest increase in this metric since the first quarter of 2022.
Among the highlights, the First 50 locations—stores that Macy's is focusing on as part of its turnaround strategy—witnessed a 0.8% increase in comparable sales. This marks the fourth consecutive quarter of positive results for these key locations. Despite the overall decline, these two bright spots suggest that Macy's turnaround strategy is beginning to show some signs of vitality, although it may take longer than anticipated to fully materialize.
For the fiscal year 2025, Macy's anticipates adjusted earnings per share in the range of $2.05 to $2.25 and revenue expectations of between $21 billion and $21.4 billion. These projections fall short of Wall Street's estimates, which are set at $2.31 per share and $21.8 billion, according to data from LSEG.
In its fiscal fourth quarter, Macy's reported earnings per share of $1.80 (adjusted), surpassing the expected $1.53. However, the company's revenue of $7.77 billion was below the anticipated $7.87 billion. The net income for the three-month period ending February 1 was $342 million, equivalent to $1.21 per share, a significant improvement from a loss of $128 million (or 47 cents per share) recorded the previous year. Excluding one-time items such as impairments and restructuring charges, Macy's reported earnings of $507 million, or $1.80 per share.
Despite the positive signs in certain areas, Macy's has faced challenges similar to other retailers. The company reported a sales drop to $7.77 billion, down approximately 4% from $8.12 billion the previous year. It is important to note that Macy's benefited from an additional selling week in the previous year, which has complicated year-over-year comparisons. Under CEO Spring's leadership, who has been at the helm for just over a year, the company has implemented a rigorous store closure plan that includes the closure of 150 stores and a strategy aimed at revitalizing its better-performing locations.
Spring has acknowledged the longstanding issues faced by Macy's, including insufficient staffing and a lack of attention to essential retail elements necessary for success. In response, Macy's is investing in 50 locations to enhance staffing, merchandising, and visual presentation. So far, this initiative appears to be yielding positive results, with these locations outperforming the majority of the chain. However, Macy's will still have around 350 locations remaining after the closures, and it will require time and capital to extend this revitalization strategy across the broader network.
Investor patience will be crucial as Macy's navigates these changes. In December, activist investor Barington Capital disclosed its stake in Macy's, advocating for cost-cutting measures, a review of its luxury brands, and a thorough evaluation of its real estate portfolio. This marks the fourth activist campaign targeting Macy's within the last decade. Similar to previous activist efforts from Arkhouse and Brigade, many speculate that Barington is primarily focused on Macy's valuable real estate assets rather than the comprehensive revitalization of the business.
In a bid to enhance shareholder value, Macy's has announced its intention to resume share buybacks under an existing $1.4 billion share repurchase authorization, contingent on market conditions. "Building on our momentum, we continue to elevate the customer experience, deliver operational excellence, and make prudent capital investments," stated Adrian Mitchell, Macy's Chief Operating Officer and Chief Financial Officer. The company remains dedicated to generating healthy free cash flow and returning capital to shareholders through share buybacks and reliable quarterly dividends.
