Macy’s Shares Plummet 8.5% Amid Lowered Sales Guidance: What This Means for Investors
Shares in Macy’s (NYSE: M) took a significant 8.5% hit in premarket trading on Wednesday, as the retail giant adjusted its sales projections for fiscal 2025, falling short of consensus estimates.
Q2 Fiscal 2025 Performance Highlights
- Earnings Per Share (EPS): Macy’s reported an EPS of $0.53, outperforming the consensus estimate of $0.30 by a considerable margin.
- Revenue: The company posted revenues of $5.1 billion for the quarter, slightly above the anticipated $5.06 billion.
- Comparable Sales: On an owned basis, comparable sales declined by 4%, while owned plus licensed comparable sales dropped by 3.3%, against an estimated increase of 0.63%.
- Gross Margin: Macy’s achieved a gross margin of 40.5%, up from 38.1% in the previous year and surpassing the estimated 39.8%.
- Inventory: Inventory levels rose by 6% year-over-year to $4.38 billion, exceeding the forecasted $4.21 billion.
Forward Guidance and Revised Forecast
- Full-Year EPS: Macy’s now expects full-year EPS to range between $2.55 and $2.90, aligning closely with the consensus estimate of $2.78.
- Net Sales Forecast: The company revised its net sales forecast to $22.1 billion - $22.4 billion, down from the previous guidance of $22.3 billion - $22.9 billion and falling short of the consensus estimate of $22.66 billion.
- Comparable Sales Outlook: Macy’s projects owned plus licensed comparable sales to decrease by 0.5% to 2%, a downward revision from the earlier forecast range of -1% to +1.5%, compared to the estimated 0.68% increase.
Executive Commentary
“During the second quarter, we delivered strong earnings performance in a challenging consumer environment,” said Tony Spring, Chairman, and CEO of Macy’s, Inc. “We are seeing signs of our strategy taking root, including two consecutive quarters of positive comparable sales in Macy’s First 50 locations. We are encouraged by the early traction of our Bold New Chapter and remain committed to returning Macy’s, Inc. to sustainable profitable growth.”
Simplified Analysis for Everyday Investors
What Happened?
Macy’s shares dropped by 8.5% after the company updated its sales forecast for fiscal 2025, which did not meet market expectations. Despite this, Macy’s reported better-than-expected earnings and revenue for Q2 2025.Why Does It Matter?
- Earnings Beat: Macy’s EPS of $0.53 was much higher than the expected $0.30, indicating strong profitability in the short term.
- Sales Drop: The company's revised sales projections were lower than anticipated, signaling potential challenges ahead in maintaining growth.
- Inventory Increase: Higher inventory levels suggest that Macy’s may be accumulating stock, which could impact future profitability if not managed properly.
How Does It Affect You?
If you’re an investor, this news is a mixed bag. On one hand, Macy’s strong earnings performance is a positive sign. On the other hand, the lowered sales guidance and increased inventory levels could indicate potential hurdles in the near future. It’s crucial to keep an eye on how Macy’s navigates these challenges and whether their strategic initiatives will lead to sustainable growth.For those considering investing in Macy’s, it’s advisable to proceed with caution and keep an eye on future earnings reports and market conditions.