Yahoo Sports Macy’s CEO Notes Consumers ‘Under A Lot of Pressure’
Macy’s Inc., seeing waning consumer demand, reported first-quarter top- and bottom-line declines and has revised its guidance for the year downward.
Net income for the quarter ended April 29 was $155 million, or $0.56 per diluted share, compared to $286 million, or $0.98 per share, in the year-ago period.
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Earnings before interest, taxes, depreciation and amortization came to $466 million versus $684 million in the year-ago quarter.
Net sales of $5 billion were down 7 percent compared to $5.35 billion in the first quarter of 2022. Comparable sales were down 7.2 percent.
“Definitely our consumer particularly on the Macy’s side is under a lot of pressure,” Macy’s chairman and chief executive officer Jeff Gennette told WWD. “They’re become quite choosey where they put their spend and they are buying closer to need.
“February and March were pretty solid, until mid-March when all three brands definitely saw a downshift and worsened in April,” Gennette said, referring to Macy’s, Bloomingdale’s and Bluemercury. Spring transition merchandise did not sell at the expected rate, Gennette added. “The weather is unpredictable. You’ve got to make sure you’ve got choices. We did not have enough offering in cooler weather product.”
Gennette told WWD that Macy’s Inc. will be taking more aggressive markdowns in the second quarter, adding, “We are deeply committed to going into the third quarter with the right number of units.”
In May, “Bloomingdale’s saw a nice bounce back in warmer categories. Macy’s got a little bounce.” But overall, the improvement in business was “not enough for us to have confidence there is a change in the consumer.”
On the positive side, Gennette said there have been “pockets of strength in fragrance, color, treatment, textiles, housewares and tabletop.” He also said the home business at Bloomingdale’s has been robust.
For the back half of this year, Gennette was most positive about the beauty and gift categories, which will represent 41 percent of the company’s inventory then, compared to 36 percent a year ago. He’s also upbeat about fine jewelry, fashion jewelry, handbags, textiles and throws for the back half.
At Macy’s, there is much anticipation about two additions to the assortment later this year: Nike men’s and women’s apparel in October and a new private brand launching in August. Macy’s currently sells Nike footwear through its Finish Line partnership, as well as licensed Nike childrenswear, but hasn’t sold Nike women’s and men’s fashion for about a year and a half, since Nike decided to reduce its wholesale distribution.
Asked when Macy’s expects a turn in the business, Gennette replied that if current economic conditions persist, the strategies the company has in place will lead to both profit and topline growth next year.
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Tony Spring, currently president and CEO-elect of Macy’s Inc. and former Bloomingdale’s CEO, has been working in several areas including digital, merchandising, brands and marketing, and is still involved in running Bloomingdale’s, as the corporation searches for a new Bloomingdale’s CEO. “We are actively searching. We have a good [group] of prospective candidates. Tony is leading that search,” Gennette said.
Those Macy’s Inc. could consider or at least consult with include Joshua Schulman, former Coach president and Bergdorf Goodman president; Marc Mastronardi, chief stores officer at Macy’s; Denise Incandela, Walmart U.S. executive vice president of apparel and private brands; Calvin McDonald, CEO of Lululemon; Janet Hayes, CEO of Crate & Barrel, and Laura Alber, CEO of Williams-Sonoma Inc.
Spring, who will become Macy’s CEO in February when Gennette retires, hinted at his agenda and where Macy’s Inc.’s growth will come, citing five growth vectors: private brands; smaller, specialized off-mall formats; the Macy’s online marketplace already operating and the Bloomingdale’s marketplace which will launch early fall; luxury, and personalized offerings and communications. At Macy’s, private brands represent 16 percent of the business. “We do see it growing,” Gennette said.
“There are opportunities to simplify operations and to make the shopping experience more enjoyable for customers. There is more work to do on curation, imagination, storytelling and inspiration,” Spring said.
“We continue to attract multigenerations,” he added. “The Bloomingdale’s team has generated more business with younger customers than we did years ago. It starts with having the brands consumers are looking for, having a strong digital strategy and making sure we have a powerful presence in the social space. There is an opportunity to own a greater share of the business with younger customers.”
Brick-and-mortar sales decreased 6 percent versus the first quarter of 2022, and digital sales decreased 8 percent versus the first quarter of 2022.
Macy’s stock rose 1.2 percent, or $0.16, to $13.75 on Thursday, after initially retreating 3 percent in early-morning trading.
“During the first quarter, we delivered a solid beat on our gross margin rate and bottom-line expectations enabled by our disciplined teams, strength of our inventory management and operational efficiencies,” Gennette said in a statement. “We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories.
“We have moved quickly to take the appropriate actions to meet current consumer demand and manage our expenses,” Gennette added. “Our revised guidance reflects incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year.”
By division, Macy’s comparable sales were down 7.9 percent. The bestselling categories last quarter were beauty, particularly fragrances, men’s tailored clothing, women’s career sportswear and off-price with Backstage.
Bloomingdale’s comparable sales were down 4.3 percent. Bestselling categories last quarter were beauty, particularly fragrances, women’s and men’s contemporary apparel, housewares and the outlet locations.
At Bluemercury, comparable sales were up 4.3 percent. Bestselling categories were clinical and medical skin care and color during the quarter.
Merchandise inventories were down 7 percent year-over-year and down 16 percent compared to 2019, “reflecting ongoing disciplined inventory management.”
The company is taking pricing actions in the second quarter to sell through remaining first-quarter seasonal merchandise inventories and May receipts at the Macy’s nameplate and anticipates end of second-quarter merchandise inventories to be down low- to mid-single digits compared to last year.
Macy’s Inc.’s gross margin rate for the quarter was 40 percent, up from 39.6 percent in the first quarter of 2022. Versus the first quarter of 2019, gross margin rate increased 180 basis points from 38.2 percent.
Macy’s is now forecasting net sales of $22.8 billion to $23.2 billion for all of 2023. Previously, the retailer projected net sales of $23.7 billion to $24.2 billion.
Comparable sales are seen down 7.5 to 6 percent this year. Previously, comparable sales were projected down 4 to 2 percent.
Adjusted earnings per share are now seen at $2.70 to $3.20, versus the previous forecast of $3.67 to $4.11.
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