Shares in Macy’s (M) plummeted 12% following Wednesday's market open after the company cut its sales guidance for the fiscal 2025, missing consensus estimates.
For the fiscal Q2 2025, the department store chain reported earnings per share (EPS) of $0.53, significantly above the analyst estimate of $0.30. The company posted revenue of $5.1 billion for the quarter, compared to the consensus estimate of $5.06 billion.
Comparable sales on an owned basis declined by 4%, while owned plus licensed comparable sales decreased by 3.3%, against an estimated increase of 0.63%.
Macy's (NYSE:M) reported a gross margin of 40.5%, higher than the previous year's 38.1% and above the estimated 39.8%.
Inventory stood at $4.38 billion, marking a 6% year-over-year increase and exceeding the estimate of $4.21 billion.
Looking ahead, Macy’s expects full-year EPS to range between $2.55 and $2.90, compared to the consensus estimate of $2.78.
Notably, its net sales forecast range has been revised down to $22.1 billion - $22.4 billion, down from the previous guidance of $22.3 billion - $22.9 billion, with the consensus estimate at $22.66 billion.
"We believe the lower sales outlook will likely cause the Street to trim its FY24 EPS guidance slightly, but still stay within M's FY24 EPS guidance range," analysts at UBS commented.
They believe the report will have a "modestly negative impact" on investor sentiment.
The company now anticipates owned plus licensed comparable sales to decline by 0.5% to 2%, a revision from the earlier forecast of -1% to +1.5%, against the estimate of a 0.68% increase.
“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.”
In their post-earnings note, analysts at TD Cowen said Macy's executed well on higher full-price sales year-over-year along with cost efficiencies. However, citing higher inventory levels ahead of the second half of 2024, they prefer to "remain on the sidelines," reiterating a Hold rating.