Macy's, the iconic department store chain, reported better-than-expected first-quarter results on Tuesday, as the company's new turnaround strategy showed early signs of traction amidst a challenging retail environment. The company's revenue of $4.85 billion, although down 2.7% compared to last year, slightly surpassed Wall Street's estimates of $4.81 billion. Adjusted earnings per share of $0.27 also topped the expected $0.14, while same-store sales fell 1.2%, outperforming the predicted 2.78% decline.
The first-quarter report comes on the heels of CEO Tony Spring's recently launched "A Bold New Chapter" initiative, which includes plans to close 150 underperforming stores, improve the remaining stores and product assortment, and invest in digital sales. In the quarter, the focus stores that will remain open saw same-store sales growth of 0.1%, compared to the 4.5% drop at the closing locations.
Macy's CFO Adrian Mitchell expressed optimism about the company's progress, telling Yahoo Finance, "We do believe that we're getting traction, it's still early days, ...We're still practicing the changes in the stores from a staffing and selling and service standpoint, there are a number of changes that are still not implemented in the store. There's more to come as we get into the summer season than the back half of this year."
In light of the better-than-expected results, Macy's raised its full-year guidance, now anticipating net revenue in the range of $22.3 billion to $22.9 billion, with same-store sales expected to come in between a 1% year-over-year drop to a 1.5% increase. Adjusted earnings guidance was also boosted to a range of $2.55 to $2.90, up from the previous $2.45 to $2.85.
Despite the positive signs, Wall Street remains skeptical about the company's future. UBS analyst Jay Sole noted that it is "unlikely" the new initiatives will make a significant difference, while CFRA analyst Zachary Warring expects sales to continue declining, predicting "a low-single-digit decline over the next five years."
The earnings report also comes amid the lingering possibility of a buyout, with Arkhouse Management and its partner Brigade having made a $6.6 billion offer to take the department chain private. When asked about the potential for Macy's to go private, Mitchell alluded to the company staying the course as a public entity, emphasizing a renewed focus on sales growth and delivering on its promises.
Macy's subsidiaries, Bloomingdale's and cosmetics business Bluemercury, both saw same-store sales growth, up 0.8% and 4.3%, respectively. Mitchell considers these businesses growth drivers, noting the potential for expansion in markets where Macy's luxury presence is limited.
The company's credit card revenue dropped $45 million to $117 million, attributed to the impact of expected higher delinquency rates and net credit losses within the portfolio. However, its ad business, Macy's Media Network, saw an $8 million jump in revenue to $37 million, driven by increased vendor engagement.
