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01/11 11:29
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while store closures and reimagined locations show strategic focus, financial metrics like SG&A increase and cash flow outflow raise concerns. The Q&A reveals uncertainties around pricing and tariff impact, but management's cautious optimism and reaffirmed guidance provide some reassurance. Shareholder returns through dividends and buybacks are positive, but lack of specific guidance on buybacks and unclear management responses temper enthusiasm. Overall, the sentiment is neutral, with no strong catalysts for significant stock price movement.
Net Sales $4.6 billion, down 5.1% year-over-year; decline attributed to $170 million from last year's 64 non-go-forward store closures.
Comparable O+L+M Sales Declined 1.2% year-over-year; guidance was for a decline of 4.5% to 2.5%. International tourism negatively impacted comps by about 30 basis points.
Adjusted Diluted EPS $0.16, compared to $0.27 last year; exceeded guidance range of $0.12 to $0.15.
Net Credit Card Revenues $154 million, up $37 million year-over-year; increase driven by higher profit share and strong credit portfolio management.
Macy's Media Network Revenues $40 million, up 8% year-over-year; growth attributed to increased advertiser spend.
Gross Margin $1.8 billion or 39.2% of net sales, flat year-over-year; merchandise margin improved 40 basis points, offset by higher delivery expenses.
SG&A Expense $1.9 billion, relatively flat year-over-year; as a percent of total revenue, SG&A was 39.9%, up 170 basis points due to lower net sales.
Adjusted EBITDA $324 million or 6.8% of total revenue; core adjusted EBITDA was $308 million or 6.4% of total revenue.
Operating Cash Flow Outflow of $64 million; free cash flow outflow of $203 million, with capital expenditures of $177 million.
Shareholder Returns Returned approximately $152 million to shareholders, consisting of $51 million in cash dividends and $101 million in share repurchases.
New Product Introductions: Recently introduced contemporary apparel brands, Good American, Fury and NIC+ZOE have been well-received.
Luxury Brand Launches: Bloomingdale's posted a positive 3.8% comp, benefiting from brand launches such as Prada shoes and handbags online, Reformation ready-to-wear, and Burberry men's and ready-to-wear.
Market Expansion: Bloomingdale's and Bluemercury continue to expand their presence with new market entries and store formats.
International Tourism Impact: International tourism negatively impacted comps by about 30 basis points.
Operational Efficiencies: Improved in-store inventory allocation and leveraged Generative AI to modernize the supply chain.
Inventory Management: Entered the second quarter with inventories down 0.5% and ample open-to-buy for the remainder of the year.
Strategic Shifts: Continued execution of the Bold New Chapter strategy, focusing on strengthening and reimagining Macy's, differentiating luxury, and modernizing operations.
Store Closures: Closed 64 underperforming locations under the Bold New Chapter last year.
Competitive Pressures: The company anticipates an intensifying promotional landscape as the year progresses, which may impact sales and margins.
Regulatory Issues: Macy's is navigating uncertainties related to tariffs, particularly those affecting products sourced from China, which could impact gross margins by 20 to 40 basis points.
Supply Chain Challenges: The company is actively working to diversify its sourcing away from China, which currently accounts for 20% of total product origin, to mitigate risks associated with tariffs and supply chain disruptions.
Economic Factors: There is uncertainty regarding consumer health and demand due to potential tariff impacts, which could affect sales trends and overall performance.
Inventory Management: Macy's is being disciplined with inventory commitments, anticipating a more choiceful consumer and potential markdown risks.
Bold New Chapter Strategy: Macy's, Inc. is focused on three pillars: strengthening and reimagining Macy's, accelerating and differentiating luxury, and simplifying and modernizing end-to-end operations.
Reimagine 125 Locations: These locations outperformed the remainder of the fleet, with a negative 0.8% comp versus a negative 2.1% comp for the total Macy's nameplate.
Luxury Business Performance: Bloomingdale's and Bluemercury both delivered positive comps, with Bloomingdale's at 3.8% and Bluemercury at 1.5%.
Supply Chain Modernization: Leveraging Generative AI to modernize supply chain and improve in-store inventory allocation.
Store Closures: Closed 64 underperforming locations as part of the Bold New Chapter strategy.
Full Year Net Sales Guidance: Expecting net sales of $21 billion to $21.4 billion, with comps down roughly 2% to down roughly 0.5%.
Second Quarter Net Sales Guidance: Expecting net sales of $4.65 billion to $4.75 billion.
Adjusted EPS Guidance: Expecting adjusted diluted EPS of $1.60 to $2 for the full year.
Capital Expenditures Guidance: Anticipating capital expenditures of approximately $800 million.
Gross Margin Guidance: Expecting gross margin to be roughly 30 to 70 basis points below the comparable period last year.
Quarterly Cash Dividends: $51 million in quarterly cash dividends returned to shareholders.
Share Repurchases: $101 million of share repurchases during the quarter.
The earnings call summary presents a mixed picture. Financial performance shows lower sales but improved core adjusted EBITDA. Product development is positive, with new initiatives like the Reimagine 125 stores. Market strategy seems cautious due to macroeconomic uncertainties, and gross margin compression is expected. However, the company is optimistic about Q4 and confident in its competitive positioning. The Q&A reveals some concerns about consumer behavior and gross margin compression. Overall, the sentiment is neutral, with some positive aspects balanced by uncertainties and challenges.
The earnings call summary reveals mixed signals: improved traffic and ticket, strong category performances, and raised Q4 guidance are positives. However, gross margin compression due to tariffs, cautious consumer outlook, and reduced media network guidance are concerns. The Q&A section adds confidence with strategic positioning and credit business strength, but uncertainties around store closures and media guidance persist. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
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