Shares of Macy’s ( M -12.00% ) are retreating today after the department store company reported disappointing sales results for its second quarter, despite having strong profits. Consequently, the stock had fallen by 12% as of 11:24 a.m. ET.
Macy’s continues to downsize.
The retailer announced a 3.8% drop in revenue, bringing it to $4.9 billion, falling short of the expected $5.12 billion. Comparable sales decreased by 3.3%, indicating that the company is still losing customers in a tough market climate. Retailers that sell non-essential goods .
Sales at Macy’s, when measured on an owned basis, saw a decrease of 4.5%. Meanwhile, Bloomingdale’s experienced a decline of 1.1%, but BlueMercury, the company’s beauty brand, saw a 2% increase.
Photo credit: Getty Images.
Macy’s recent disappointing overall performance follows their rejection of another acquisition proposal last month. The company appears to be having difficulty formulating a long-term plan for recovery.
Despite this, Macy’s managed to enhance its cost efficiency, with the gross margin rising by 240 basis points to reach 40.5%, thanks to reduced discounting compared to the previous year. While selling, general, and administrative (SG&A) expenses decreased by $7 million, totaling $2 billion, they increased by 120 basis points as a percentage, reaching 38.7%, due to the drop in sales. However, this was still sufficient for generally accepted accounting principles. GAAP ) increase operating income from $124 million to $222 million, effectively doubling it.
At the end of the day, the adjusted earnings per share increased from $0.26 to $0.53, surpassing the expected consensus of $0.30. CEO Tony Spring described the results as a “robust earnings performance in a difficult consumer climate.”
What are the upcoming plans for Macy’s?
Investors appeared to be let down by the projections, as Macy’s reduced its full-year revenue estimate from $22.3 billion-$22.9 billion to $22.1-$22.4 billion. Additionally, it decreased its comparable sales forecast to a range of negative 2% to negative 0.5%, although it kept its adjusted earnings-per-share outlook unchanged at $2.55-$2.90.
The stock is considered inexpensive, given the forecast, with a price-to-earnings ratio of approximately 6. However, it is probably not going to increase in value until the company starts experiencing sales growth again.
