Macy's beats earnings expectations as turnaround strategy attracts more affluent shoppers

Shares of Macy’s popped by 3% during early hours on Tuesday after the company reported first quarter earnings.

“We are encouraged by our customers’ response to our Bold New Chapter strategy resulting in sales near the high end of our outlook,” said Tony Spring, chief executive officer at Macy’s, in a statement. “Although early days, our investments in product, presentation and experience are gaining traction and reinforce our belief that longer-term, Macy’s can return to sustainable, profitable growth.”

For the first quarter, Macy’s reported revenue of $4.85 billion, about $0.27 cents a share. Analysts expected the company to generate $4.86 billion, roughly $0.15 cents a share.

The retailer’s latest quarterly report follows chief executive Spring’s “Bold New Chapter” announcement in February, in which he said Macy’s would aim to accelerate its financial position and deliver sustainable profitable growth. Spring took the helm of the company during that time.

The initiative appears to be resonating with higher earning consumers. Sales at Bloomingdale’s and its beauty chain Bluemercury were both up during the quarter, the company said in its earnings release.

Macy’s, however, has been struggling for years to capture the attention of consumers who have quickly adopted to the ease and convenience of online shopping. That in turn has led to a significant decline in foot traffic for Macy’s.

To add to its woes, the Covid-19 pandemic didn’t help the retailer fend off the rapid decline of shopping malls. In February, Macy said it would shutter nearly 150 locations over the next three years in an effort to expand beyond malls. In January, Macy’s said it would lay off 3% of its staff, doing away with 2,350 workers.

It’s underperformance has also exasperated shareholders that want to take the company private. In January, Macy’s rejected an initial $5.8 billion takeover bid from investment firms Arkhouse Management and Brigade Capital Management, in part because they did not provide a viable financing plan, the company said.

Nonetheless undeterred, in early March the firms increased their offer and submitted a new all-cash proposal to acquire Macy’s for roughly $6.6 billion. In April, Macy’s settled its proxy fight with the firms, but again rejected the proposal. Instead, it said it would be adding two directors that would help evaluate and make recommendations regarding the acquisition proposal from the two firms.

The retailer is still trying to find its footing. For the fiscal year, Macy’s said it continues to view 2024 as a “transition and investment year,” that aims to reflect the company’s investments in “customer-focused strategic initiatives.” It expects net sales to be between $22.3 billion and $22.9 billion.

But even so, the updated outlook assumes customers will continue to be discerning in their discretionary purchases, Macy’s said.