"Macy's Misses the Mark on Fourth Quarter Profit as It Issues Cautious 2025 Guidance"

Ladies and Gentlemen, buckle up! Macy's just reported its fourth-quarter earnings, and it's not pretty. The retail giant missed its profit targets, and now it's issuing cautious guidance for 2025. Let's dive in and see what's going on!



First, let's talk about the numbers. Macy's reported a 4.3% decrease in net sales to $7.8 billion, with comparable sales down 1.1% on an owned basis but up 0.2% on an owned-plus-licensed-plus-marketplace basis. That's a mixed bag, folks! On one hand, the company saw growth in its overall sales when including licensed and marketplace sales. On the other hand, the decrease in owned comparable sales is a red flag.

Now, let's talk about the factors that contributed to Macy's missed profit targets. The company's gross margin rate decreased by 80 basis points to 35.7%, impacted by the conversion to cost accounting and unfavorable product mix. Selling, general, and administrative (SG&A) expenses increased by 100 basis points to 29.7% of total revenue due to lower total revenue. Additionally, credit card revenues, net decreased by $20 million, or 10.3%, primarily due to lower year-over-year profit share and higher net credit losses.

But it's not all doom and gloom, folks! Macy's First 50 locations, Bloomingdale’s, and Bluemercury showed positive growth. Macy’s First 50 locations delivered four consecutive quarters of comparable sales growth, up 0.8% on an owned basis and up 1.2% on an owned-plus-licensed basis. Bloomingdale’s reported owned comparable sales growth of 4.8% and its highest fourth-quarter owned-plus-licensed-plus-marketplace comparable sales growth of 6.5%. Bluemercury reported its 16th consecutive quarter of comparable sales growth, up 6.2%.

So, what does this mean for Macy's 2025 guidance? The company is focusing on expanding its omnichannel presence, improving customer experience, growing its luxury brands, generating healthy free cash flow, and returning capital to shareholders. Macy's ended the year with $1.3 billion of cash on the balance sheet, up $272 million from last year and generated nearly $1.3 billion of operating cash flow and $679 million of free cash flow. The company also announced its intent to resume share buybacks under the remaining $1.4 billion share repurchase authorization, market conditions permitting.

But here's the thing, folks. Macy's Bold New Chapter strategy has had a mixed impact on its financial performance and long-term growth prospects. While the strategy has led to some improvements in key areas, the overall financial performance has been challenging. To achieve better results, Macy's might need to make several adjustments. First, the company could expand the First 50 initiative to more locations. Second, Macy's could focus more on its digital and omnichannel presence. Third, Macy's could consider further investments in customer experience and service. Finally, Macy's could consider further investments in its supply chain.

So, what's the bottom line? Macy's missed the mark on fourth-quarter profit, and its 2025 guidance is cautious at best. But there are still opportunities for growth, and the company is taking steps to capitalize on them. Stay tuned, folks! This story is far from over.