Macy’s, a prominent department store chain, fell short of analysts’ revenue expectations for the quarter and revised its sales outlook for the year downwards. The company attributed this to a more selective consumer base and increased promotional activity compared to its previous projections.
In a statement released on Wednesday, Macy’s reported a 3.8% decline in sales for the second quarter, totaling $4.9 billion, which was below the consensus estimate of $5.10/$5.06 billion from Goldman Sachs. CEO Tony Spring noted that customers had become even more discerning, leading to lower conversion rates and a cautious approach to spending.
Goldman analysts acknowledged that while Macy’s exceeded earnings per share expectations due to improved margins, the decline in sales was significant. Despite this, the company managed to maintain profitability with higher gross margins and lower operating expenses.
Following the disappointing quarter, Macy’s revised its annual sales forecast to a range of $22.1 to $22.4 billion, down from the previous estimate. The company also adjusted its earnings per share guidance for the year, citing a challenging consumer environment.
CEO Spring expressed concerns about the remainder of the year, anticipating continued challenges for consumers. To address the slowdown in spending, Macy’s increased product discounts while focusing on cost-saving measures that do not compromise the customer experience.
Goldman analysts maintained a Buy rating on Macy’s stock, with a 12-month price target of $23. They highlighted the company’s real estate assets as a potential value driver.
In response to Macy’s struggles, shares of the company dropped more than 13% in early trading. This decline reflected a broader trend of negative performance over several years.
In contrast, Target surpassed Wall Street’s expectations for earnings and revenue but expressed caution about consumer behavior in the near future. Analysts noted that consumer weakness would likely persist throughout the year.
Overall, the retail industry faces challenges as companies navigate changing consumer preferences and economic uncertainties. The impact of these factors is evident in various sectors, with companies like Home Depot, Lowe’s, McDonald’s, and Disney also reporting concerns about consumer spending.
In conclusion, Macy’s faces ongoing challenges in a competitive retail landscape, with the company working to adapt its strategies to meet evolving consumer demands and economic conditions.