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Macy’s, Inc. (M - Free Report) has reported second-quarter fiscal 2024 results, wherein the top line lagged the Zacks Consensus Estimate while the bottom line surpassed the same. Total revenues declined and earnings increased from the year-ago quarter’s reported figures. Comparable sales (comps) fell on an owned basis and an owned-plus-licensed basis.
M shares have lost 19.7% in the past six months compared with the industry’s 16.6% decline.
Macy’s, currently carrying a Zacks Rank #3 (Hold), has reported adjusted earnings of 53 cents per share, surpassing the Zacks Consensus Estimate of 32 cents. Also, the bottom line increased from adjusted earnings of 23 cents in the year-ago period.
Net sales of $4,937 million missed the consensus estimate of $5,091 million. Also, the top line dipped 3.8% from the year-ago quarter. Comps fell 4% on an owned basis and 3.3% on an owned-plus-licensed-plus-marketplace basis from the prior-year quarter. We expected comps to decline 1.6% on an owned basis and 1.5% on an owned-plus-licensed-plus-marketplace basis.
Macy's ongoing business comps, including both go-forward locations and digital platforms across all nameplates, decreased 3.8% on an owned basis and 3% when including owned, licensed and marketplace channels.
Net credit card revenues were $125 million, up 4.2% from the year-ago period. The metric represented 2.5% of sales, up 20 basis points from the year-ago quarter.
Image Source: Zacks Investment Research
Details by Brands
Comps across Macy’s declined 4.5% year over year on an owned basis and 3.6% on an owned-plus-licensed-plus-marketplace basis. At the Bloomingdale’s brand, comps decreased 1.1% on an owned basis and 1.4% on an owned-plus-licensed-plus-marketplace basis. Comps at the Bluemercury brand rose 2% on an owned basis.
Margins
The gross margin was 40.5%, whereas our estimate was pegged at 39.8%. The metric increased 240 basis points from 38.1% in the prior-year quarter. The merchandise margin increased by 210 basis points primarily due to reduced year-over-year discounting, favorable inventory shortages resulting from the company's asset protection efforts, and M's transition to cost accounting.
Delivery expenses as a percentage of net sales improved year over year by 30 basis points, driven by lower shipped sales volumes and enhanced delivery expense management, reflecting cost-saving measures and process re-engineering initiatives.
The company reported selling, general and administrative (SG&A) expenses of $1.97 billion, down 0.4% from $1.98 billion in the year-ago period. As a percentage of net sales, SG&A expenses increased 140 basis points year over year to 40% on lower net sales. Our estimate for SG&A as a percentage of net sales was 40.1% for the quarter under review.
Macy’s reported an adjusted EBITDA of $438 million, up 26.2% from an adjusted EBITDA of $347 million in the year-ago quarter. We note that the adjusted EBITDA margin was 8.9%, up 210 basis points year over year.
Other Financial Aspects
M ended the fiscal second quarter with cash and cash equivalents of $646 million, long-term debt of $2.99 billion, and shareholders' equity of $4.30 billion. Merchandise inventories rose 6% on a year-over-year basis. In the second quarter of fiscal 2024, Macy’s provided cash from operating activities of $137 million.
A Peek Into Guidance
The company has revised its annual outlook to account for more cautious consumers and a more intense promotional environment than previously anticipated. This updated outlook is intended to provide the flexibility needed to navigate the continued uncertainty in the discretionary consumer market. M has reaffirmed its annual adjusted earnings per share outlook.
However, Macy's continues to see fiscal 2024 as a transitional and investment year, focusing on key strategic initiatives to improve customer experience. With the support of a strong balance sheet, the company will prioritize enhancing its gross margin and maintaining expense control to safeguard profitability amid ongoing macroeconomic challenges.
Net sales are projected to be $22.1-$22.4 billion, a slight reduction from the previously stated $22.3-$22.9 billion. Notably, the company reported net sales of $23.1 billion in fiscal 2023.
The outlook for comparable owned-plus-licensed-plus-marketplace sales on a 52-week basis has also been adjusted, with a projected year-over-year decline of 0.5-2%, down from the previously stated range between a drop of 1% and an increase of 1.5%.
Adjusted earnings per share are envisioned to be $2.55-$2.90 for fiscal 2024, implying a decline from the $3.50 earned in the prior year.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.
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Macy's (M) Q2 Earnings Beat Estimates, Comps Decline Y/Y
Macy’s, Inc. (M - Free Report) has reported second-quarter fiscal 2024 results, wherein the top line lagged the Zacks Consensus Estimate while the bottom line surpassed the same. Total revenues declined and earnings increased from the year-ago quarter’s reported figures. Comparable sales (comps) fell on an owned basis and an owned-plus-licensed basis.
M shares have lost 19.7% in the past six months compared with the industry’s 16.6% decline.
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), has reported adjusted earnings of 53 cents per share, surpassing the Zacks Consensus Estimate of 32 cents. Also, the bottom line increased from adjusted earnings of 23 cents in the year-ago period.
Net sales of $4,937 million missed the consensus estimate of $5,091 million. Also, the top line dipped 3.8% from the year-ago quarter. Comps fell 4% on an owned basis and 3.3% on an owned-plus-licensed-plus-marketplace basis from the prior-year quarter. We expected comps to decline 1.6% on an owned basis and 1.5% on an owned-plus-licensed-plus-marketplace basis.
Macy's ongoing business comps, including both go-forward locations and digital platforms across all nameplates, decreased 3.8% on an owned basis and 3% when including owned, licensed and marketplace channels.
Net credit card revenues were $125 million, up 4.2% from the year-ago period. The metric represented 2.5% of sales, up 20 basis points from the year-ago quarter.
Image Source: Zacks Investment Research
Details by Brands
Comps across Macy’s declined 4.5% year over year on an owned basis and 3.6% on an owned-plus-licensed-plus-marketplace basis. At the Bloomingdale’s brand, comps decreased 1.1% on an owned basis and 1.4% on an owned-plus-licensed-plus-marketplace basis. Comps at the Bluemercury brand rose 2% on an owned basis.
Margins
The gross margin was 40.5%, whereas our estimate was pegged at 39.8%. The metric increased 240 basis points from 38.1% in the prior-year quarter. The merchandise margin increased by 210 basis points primarily due to reduced year-over-year discounting, favorable inventory shortages resulting from the company's asset protection efforts, and M's transition to cost accounting.
Delivery expenses as a percentage of net sales improved year over year by 30 basis points, driven by lower shipped sales volumes and enhanced delivery expense management, reflecting cost-saving measures and process re-engineering initiatives.
The company reported selling, general and administrative (SG&A) expenses of $1.97 billion, down 0.4% from $1.98 billion in the year-ago period. As a percentage of net sales, SG&A expenses increased 140 basis points year over year to 40% on lower net sales. Our estimate for SG&A as a percentage of net sales was 40.1% for the quarter under review.
Macy’s reported an adjusted EBITDA of $438 million, up 26.2% from an adjusted EBITDA of $347 million in the year-ago quarter. We note that the adjusted EBITDA margin was 8.9%, up 210 basis points year over year.
Other Financial Aspects
M ended the fiscal second quarter with cash and cash equivalents of $646 million, long-term debt of $2.99 billion, and shareholders' equity of $4.30 billion. Merchandise inventories rose 6% on a year-over-year basis. In the second quarter of fiscal 2024, Macy’s provided cash from operating activities of $137 million.
A Peek Into Guidance
The company has revised its annual outlook to account for more cautious consumers and a more intense promotional environment than previously anticipated. This updated outlook is intended to provide the flexibility needed to navigate the continued uncertainty in the discretionary consumer market. M has reaffirmed its annual adjusted earnings per share outlook.
However, Macy's continues to see fiscal 2024 as a transitional and investment year, focusing on key strategic initiatives to improve customer experience. With the support of a strong balance sheet, the company will prioritize enhancing its gross margin and maintaining expense control to safeguard profitability amid ongoing macroeconomic challenges.
Net sales are projected to be $22.1-$22.4 billion, a slight reduction from the previously stated $22.3-$22.9 billion. Notably, the company reported net sales of $23.1 billion in fiscal 2023.
The outlook for comparable owned-plus-licensed-plus-marketplace sales on a 52-week basis has also been adjusted, with a projected year-over-year decline of 0.5-2%, down from the previously stated range between a drop of 1% and an increase of 1.5%.
Adjusted earnings per share are envisioned to be $2.55-$2.90 for fiscal 2024, implying a decline from the $3.50 earned in the prior year.
Key Picks
Some better-ranked stocks are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 24.5% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It has a Zacks Rank of 2 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 51.1% and 11.5%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for American Eagle Outfitters’ fiscal 2024 earnings and sales indicates growth of 17.1% and 3.3%, respectively, from the year-ago actuals. AEO has a trailing four-quarter average earnings surprise of 28.1%.