The market expects Macy's (M.US) Q2 sales revenue to remain flat YoY, as inflationary clouds linger.

Monday, M.NUS will announce its Q2 2024 earnings after the market closes on Wednesday. Analysts expect M.NUS to report Q2 revenue of $5.1 billion, compared to $5 billion in the same period last year; and expect EPS of $0.30, compared to $0.26 in the same period last year.

Inflation impacts consumer spending

Inflationary pressures put pressure on discretionary spending, which could impact M.NUS's Q2 revenue. In Q1, its comparable sales declined 1.2% on a two-year basis and 0.3% on a three-year basis.

From the major brands, while M.NUS's comparable sales declined in Q1, Bloomingdale's and Bluemercury were standouts, with their comparable sales up in the period. This momentum is expected to continue in Q2.

M.NUS is making progress on its "bold reinvention" plan. It continues to invest in improving its full-channel capabilities and enhancing its product assortment. As part of its own brand apparel plan, the retailer completed most of its brand exits in Q4 and launched several new brands. With the continued shift, M.NUS is expected to maintain its soft comps in the current quarter and see an uptick later this year.

Driven by an increase in delinquencies and net credit losses, credit card revenue declined ~28% y/y to $117 million in Q1. Credit card revenue is expected to be flat to $122 million in Q2.

M.NUS's gross margin declined 80bps to 39.2% in Q1, mainly due to additional discounts on weather products. Gross margin is expected to be at least up 170bps y/y in Q2, reflecting higher discounts on seasonal excess inventory, discounts on spring goods and inventory reductions at some private men's brands.