Macy’s raises earnings forecast after seeing strong luxury sales, bringing in fresh holiday inventory

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Macy’s flagship store in Herald Square in New York, Dec. 23, 2021.

Scott Mlyn | CNBC

Macy’s on Thursday raised its earnings forecast for the year after its third-quarter results topped Wall Street expectations.

The department store operator said it’s in a better position with its inventory and that it will be better able to hold the line on prices as it gets fresh merchandise. The company stood by its revenue guidance for the year as it faces a tougher sale backdrop this holiday season.

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Shares of Macy’s were up 7% in pre-market trading.

Here’s how Macy’s did in its fiscal third quarter compared with what analysts were anticipating, based on Refinitiv estimates:

  • Earnings per share: 52 cents adjusted vs. 19 cents expected
  • Revenue: $5.23 billion vs. $5.2 billion expected

Comparable sales on an owned plus licensed basis fell 2.7% from a year ago. But Macy’s said the figure was up when compared to the the third quarter of 2019, before the pandemic.

For the three month period ended Oct. 29, net income fell to $108 million, or 39 per share, from $239 million, or 76 cents per share, a year earlier.

Luxury was one of Macy’s strengths in the quarter. Shoppers turned to its beauty chain, Bluemercury, and higher-end department store chain, Bloomingdale’s, to buy new clothing, shoes and makeup.

Those banners outperformed the rest of the company.

At Bloomingdale’s, comparable sales on an owned plus licensed basis were up 4.1%, as shoppers bought dressy clothing, women’s shoes and luggage.

At Bluemercury, comparable sales on an owned plus licensed basis rose 14%. It also attracted more customers — seeing a 15% increase in active customers over the previous year.

Macy’s CEO Jeff Gennette told CNBC that Bloomingdale’s customers in particular haven’t pulled back on shopping.

“That’s just been strong all the way through and we’re not seeing a degradation in their spend and do not expect that in the fourth quarter,” he said.

Heading into the key holiday shopping season, Macy’s is facing inflation that’s hovering at a near four-decade high. The company cut its full-year revenue and earnings per share forecast in August, saying it anticipates shoppers may spend less on discretionary merchandise like apparel as they pay more for groceries, housing and gas. The company also warned it may have to heavily discount items, as many retailers clear through a glut of excess inventory and cater to a more price-sensitive shopper.

On Thursday, Macy’s stood by its revenue guidance from August, saying it still expects a range of $24.34 billion to $24.58 billion for the fiscal year. It raised its annual adjusted earnings per share forecast to $4.07 to $4.27 per share, up from its previous range of $4 to $4.20. 

Earlier this week, industry-watchers got fresh clues about the health of the consumer. Both Walmart and Target reported a noticeable pullback of sales in categories like apparel, electronics and home goods as shoppers spent more on necessities. Target slashed its forecast for the holiday quarter, saying weaker sales have continued into November.

As of Wednesday’s close, Macy’s shares are down about 25% so far this year. Shares closed Wednesday at $19.71, down about 8%.

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