Macy’s (M) reports fiscal Q2 2022 earnings

Macy’s on Tuesday cut its full-year forecast, saying it anticipates deteriorating consumer spending on discretionary items like apparel that will force the department store chain to use heavy markdowns to move items off shelves.

The warning comes even as the retailer reported a fiscal second-quarter profit and revenue that topped analysts’ expectations.

Macy’s now sees fiscal 2022 revenue in a range of $24.34 billion to $24.58 billion, down from prior estimates of $24.46 billion to $24.7 billion. It puts its annual adjusted earnings per share in a range of $4.00 to $4.20, down from prior guidance of $4.53 to $4.95. Wall Street analysts had been looking for full-year guidance of $24.36 billion and $4.51 per share, according to Refinitiv consensus estimates.

The revised forecast from Macy’s follows big-box giants Walmart and Target last week both reiterating their annual forecasts even as their profits are pressured. Kohl’s, however, cut its guidance again saying that its middle-income customers are being hurt by heightened inflation.

Companies that rely on sales of discretionary items like apparel and footwear are at greater risk of underperforming in an environment where shoppers are increasingly thinking about pulling back spending.

“We expect to come out of this uncertain period in a strong position with a healthy balance sheet,” Chief Executive Officer Jeff Gennette said in a statement.

Macy’s noted both its Bloomingdale’s and Bluemercury banners captured demand in the latest quarter from higher-income spenders seeking out luxury items. Both businesses outperformed, it said.

Here’s how Macy’s performed in its fiscal second quarter compared with what analysts were anticipating, based on Refinitiv estimates:

• Earnings per share: $1 adjusted vs. 85 cents expected
• Revenue: $5.6 billion vs. $5.49 billion expected

Net income in the three-month period ended July 30 fell to $275 million, or 99 cents per share, from $345 million, or $1.08 a share, a year earlier.

Net sales fell slightly to $5.6 billion from $5.65 billion a year earlier.

Macy’s comparable sales on an owned plus licensed basis dropped 1.6% from the prior year. Analysts had been looking for a 2% decrease, according to Refinitiv.

Digital sales fell 5% from the prior year but were still up 37% compared with pre-pandemic levels, Macy’s said. E-commerce revenue accounted for 30% of total sales.

Gennette said that Macy’s so-called Polaris turnaround plans, which have entailed store closures and investments in its digital operations, have made the company faster and more agile. This has been “essential to navigate rapidly changing consumer trends and macro conditions,” he said.

Still, Macy’s can’t escape changing consumer behavior amid decades-high inflation.

Macy’s reported inventory levels in the second quarter up 7% from prior-year levels. The department store chain said it is targeting “appropriate” inventory levels by the end of the year.

It said it’s using markdowns to clear aged inventory in seasonal goods, private-brand merchandise and pandemic-related categories like active wear, sleepwear and home goods.

This story is developing. Please check back for updates.