With new CEO Jeff Gennette at the helm, Macy’s showed some signs Thursday of attaining his goal of returning to growth in same-store sales.
Macy’s reported that second-quarter sales comps — including those made in departments licensed to third parties — fell 2.5 percent, but that was better than the 3.2 percent decline expected by analysts surveyed by Thomson Reuters.
Macy’s “[isn’t] ready to declare when we will get back to positive,” Gennette told CNBC in an interview Thursday morning. “When you look at what we did in the first half, we had to show sequential improvement, and we are on track for that.”
Macy’s second-quarter earnings and sales topped Wall Street estimates. The company also reaffirmed a softer outlook for the full year.
Its share price fell 3 percent Thursday morning after initially jumping 6 percent following the earnings report.
Here’s what the company reported versus what Wall Street was expecting:
- Earnings per share: 48 cents, adjusted, compared with a consensus forecast of 46 cents by Thomson Reuters.
- Revenue: $5.55 billion versus a consensus estimate of $5.52 billion.
Macy’s second-quarter sales came in at $5.552 billion, a decrease of 5.4 percent from revenue of $5.866 billion a year ago.
Net income climbed to $116 million, or 38 cents per share, from $11 million, or 3 cents per share, a year earlier. Excluding noncash retirement plan settlement charges and net premiums and fees associated with debt repurchases, Macy’s adjusted earnings for the second quarter were 48 cents per share.
“We saw a notable contribution from the full execution of our new women’s shoe and jewelry models and the continued successful testing of Backstage in store,” CEO Gennette said in a statement.
“We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year. … There is still work ahead of us, however, I’m encouraged by the progress we’re making on overall performance.”
Looking ahead, Macy’s still expects comparable sales for the full year to decline by 2.2 percent to 3.3 percent.
Total sales are expected to be down by 3.2 percent to 4.3 percent, and earnings and expected to fall within $3.37 and $3.62 per share. This outlook remains in line with analysts’ expectations, according to a survey by StreetAccount.
“Positively, the ebbing sales tide has … slowed at a time when some of Macy’s long talked about strategic initiatives are finally coming into play,” GlobalData Retail Managing Director Neil Saunders wrote in a note to clients. “After a torrid opening quarter, Macy’s second quarter numbers come as a relief.”
Macy’s said it opened 16 freestanding Bluemercury stores and 12 Macy’s Backstage stores within existing Macy’s stores during the second quarter.
Macy’s is also in the midst of closing 100 full-line stores due to their declining profitability. The company said it plans to invest in its “highest-potential locations” and move “more aggressively in digital and mobile.”
Of all the department store chains, Macy’s has had the toughest time clawing its way back after a rough start to 2017.
Earlier this year, for example, Macy’s shares plunged when the retailer reported a 39 percent drop in its fiscal first-quarter profit, hurt by a decline in sales and higher inventory that weighed on margins. Same-store sales — a metric watched closely by Wall Street for retail stocks — also came in weaker than expected.
“The company may now be getting its act together in improving the quality of the in-store experience,” Saunders said. “We are hopeful that this energy and drive is a function of the new leadership of Jeff Gennette, although we recognize that it is still far too early in his tenure to pass fair judgment.”
Gennette, who succeeded Terry Lundgren in March, has said he’s focused on ending a two-year streak of declining comparable sales. Department stores continue to fight to keep pace with e-retailers and off-price chains that are drawing more customers their way.
One of Gennette’s goals, which he laid out shortly after starting his role, is to grow Macy’s own off-price brand, Macy’s Backstage. The CEO has said he sees Macy’s being able to compete with brands like Ross Stores, TJ Maxx and Nordstrom‘s Nordstrom Rack.
In the fall, Macy’s will launch a new loyalty program, which management mentioned on Thursday as being a sales driver in the second half of the year.
Macy’s added that it is continuing to adapt its business in order to “stabilize brick-and-mortar.” In his interview with CNBC, Gennette said this stabilization is a “high priority” for him.
As of Wednesday’s close, shares of Macy’s have fallen 32 percent over the past 12 months, and the stock is down 36 percent since the start of the year.