Macy’s has reported a sales decline in the first quarter, but management said the results exceeded their prior guidance.
The department store chain saw sales decrease 5.1 per cent to $4.6 billion for the quarter ended May 3. Comparable sales were down 2 per cent on an owned basis and 1.2 per cent on an owned-plus-licensed-plus-marketplace basis.
Both net sales and comparable sales were above expectations, according to management.
GlobalData MD Neil Saunders said the sales drop was not terrible, especially considering the impact of the ongoing store closures.
“It is also, barring the robust holiday quarter, a somewhat better performance than Macy’s delivered across most of the last fiscal year,” he added.
Saunders pointed out the divergence between the company’s segments, with Macy’s net sales falling 6.5 per cent while Bloomingdale’s and Bluemercury grew 2.6 per cent and 0.8 per cent respectively.
He stressed that the 3 per cent uplift in comparable sales at Bloomingdale’s was impressive given a slowdown in luxury.
Meanwhile, at the Macy’s brand, comparable sales dipped 2.9 per cent on an owned basis. While this is not a dire performance, it shows that the chain remains under pressure, the analyst commented.
“One of the things we look at is the delta between comparable sales for the overall Macy’s chain and that of the stores Macy’s is investing in – which are now known as the Reimagine 125 shops,” Saunders continued.
“The Reimagine stores are performing better, but this quarter comparable sales still fell by 1.3 per cent on an owned basis. This is slightly concerning as, ideally, these stores need to show positive progress to justify the Macy’s Bold New Chapter strategy.
In our view, management gets a pass for now as it is still early in the reinvention timeline; things are also being executed against the backdrop of a market that is becoming more difficult,” he elaborated.
To improve this, the analyst suggested that Macy’s double down on the changes at its stores, including more newness and the introduction of interesting brands. He added that the home department also needs to be more compelling and interesting.
On the bottom line, operating income decreased 24.8 per cent to $94 million and net income fell 38 per cent to $38 million.
For the full year, the company expects net sales to be in the range of $21 billion to $21.4 billion and comparable sales to decrease 0.5-2 per cent.
“Despite the more challenging economy ahead, Macy’s outlook is not too bad. While this means that Macy’s won’t grow, it also means it will be far from being at the bottom of the retail league table,” Saunders concluded.
