Macy's shares slide 12% as company misses top line expectations for the first time in four quarters

Macy’s reported mixed results for its fiscal second quarter, with earnings per share (EPS) surpassing expectations but revenue falling short. The company posted an EPS of $0.53, significantly above the consensus of $0.30, reflecting continued cost management and operational efficiency. However, revenue declined by 3.8% year-over-year to $4.94 billion, missing the consensus estimate of $5.06 billion. This marks the first time in over a year that Macy’s failed to meet its top-line expectations, highlighting challenges in the current retail environment.

Comparable sales also fell during the quarter, with a 4.0% decline on an owned basis and a 3.3% decline on an owned-plus-licensed-plus-marketplace basis. Macy’s go-forward business, which includes digital sales and select locations, saw a similar drop of 3.8% on an owned basis and 3.0% on an owned-plus-licensed-plus-marketplace basis. These declines reflect ongoing difficulties in maintaining consumer engagement amid a challenging economic backdrop, including inflationary pressures and a complex news cycle that has made consumers more selective in their spending.

Macy’s attributed part of its sales miss to broader macroeconomic factors, noting that the consumer discretionary environment was less stable than anticipated. As the quarter progressed, consumers became more discerning, likely influenced by persistent inflation and economic uncertainty. Despite these headwinds, competitors like Walmart, Target, and TJX saw stronger performances, particularly in apparel, raising questions about Macy’s ability to compete effectively in a crowded market where consumers are increasingly seeking value.

Looking ahead, Macy’s guidance for fiscal year 2025 reflects a cautious outlook. The company expects EPS to range between $2.55 and $2.90, which is largely in line with prior guidance and the FactSet Consensus of $2.78. However, revenue guidance was slightly lowered to a range of $22.1 billion to $22.4 billion, down from the previous forecast of $22.3 billion to $22.9 billion. Same-store sales are expected to decline by 0.5% to 2.0%, a downgrade from the prior guidance of a 1.0% decline to a 1.5% increase.

Despite the disappointing top-line performance, there were some bright spots in Macy’s results. The company’s "Bold New Chapter" strategy showed early signs of success, particularly in categories like fragrances and women’s ready-to-wear apparel. Additionally, private brands performed well, which could support margins as consumers continue to prioritize value. Macy’s First 50 initiative, which involves testing new strategies in selected stores, also delivered positive results, with a 1.0% increase in comparable sales for the second consecutive quarter.

However, the overall performance of Macy’s in Q2 was underwhelming, particularly in the context of its decision to reject a takeover bid in favor of pursuing a public turnaround strategy. Investors were likely expecting more tangible progress following this decision, and the lackluster results put additional pressure on the company to deliver stronger outcomes in the coming quarters. With consumer spending habits shifting and competitive pressures mounting, Macy’s will need to demonstrate significant improvement to justify its current strategy and maintain investor confidence.