Macy’s Inc. reported third-quarter profit that beat expectations thanks to better inventory management, though same-store sales fell for a third straight quarter.
The results underscore an emerging trend for retailers this quarter, which have reported improvements to profitability but have struggled to maintain the sales growth that powered them through the pandemic period. On Wednesday, Target Corp. also showed improved operational competence, with fewer markdowns and better inventory management driving profits despite a drop in comparable sales.
Macy’s is “entering the holiday period in a healthy inventory position,” Chief Executive Officer Jeff Gennette said in a statement. Inventories were down 6 percent in the quarter from a year ago.
Adjusted earnings per share were 21 cents, compared with the average analyst estimate of 0 cents compiled by Bloomberg. Gross margin of 40.3 percent improved from a year ago thanks to fewer product promotions than prior periods.
In addition to economic headwinds like student-loan payments resuming and higher interest rates, Macy’s has been confronting a broader move away from department-store spending and toward specialty and off-mall retail. The same-store sales decline of 7 percent on an owned basis came in worse than the 8.2 percent decline compiled by Consensus Metrix.
The shares rose 10 percent in early trading in New York. Macy’s stock had fallen 37 percent for the year through Wednesday’s close, compared with a 5 percent rise for the S&P Midcap 400 Index.
Third-quarter same-store sales at the Macy’s namesake brand were down 7.6 percent on an owned basis in the third quarter, while sales the higher-end Bloomingdale’s fell 3.2 percent. Bluemercury, which sells beauty and skincare products that have been more resilient, rose 2.5 percent. The company said beauty and cosmetics performed well across all three nameplates in the third quarter, a category that Target also called out as an outperformer.
For the full year, Macy’s now expects comparable sales to decline between 6 percent and 7 percent on an owned and licensed basis, and narrowed its adjusted earnings guidance to $2.88 to $3.13.
In early 2024, the company will announce about 10 stores it plans to close. That said, Macy’s said in October that it will open an additional 30 small-format stores by the fall of 2025 as it works to expand its presence outside of traditional malls and drive foot traffic.
Ahead of the report, analysts at UBS, which has a sell rating on the stock, noted that Macy’s has lost more than 25 percent of its market share since 2012, largely to off-price retailers, individual brands and Amazon.
“Each of these groups has major advantages over Macy’s either in price, product or service,” UBS analysts wrote. “We think it’s unlikely Macy’s can change this dynamic.”
By Olivia Rockeman
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