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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Macy's, Inc. comparable sales Increased by 3.2%, marking the strongest growth in 13 quarters. This was driven by the Go-Forward Macy's, Inc. business, which grew by 3.4%.
Adjusted EPS Reported at $0.09, significantly above the guidance range of a loss of $0.15 to $0.20 and higher than last year's $0.04. This improvement was attributed to better-than-expected net sales, comparable sales, gross margin, and SG&A.
Macy's nameplate comparable sales Grew by 2%, marking the second consecutive quarter of positive results. This was driven by the Go-Forward Macy's business (up 2.3%) and the Reimagine 125 stores (up 2.7%).
Bloomingdale's comparable sales Increased by 9%, the best in 13 quarters, driven by strong brand partnerships and category performance in ready-to-wear, men's apparel, fine jewelry, shoes, and tabletop.
Bluemercury comparable sales Grew by 1.1%, driven by dermatological skincare and expanded brand partnerships.
Net sales Reported at $4.7 billion, down 0.6% year-over-year due to the closure of 64 non-go-forward stores, which contributed $160 million in sales last year. Excluding these closures, sales grew by 2.9%.
Gross margin Reported at 39.4% of net sales, slightly down from 39.6% last year. Excluding a 50 basis point tariff impact, the gross margin rate would have expanded by approximately 30 basis points.
SG&A expense Decreased by $40 million year-over-year, reflecting benefits from closed Macy's locations and cost containment efforts, partially offset by investments in the go-forward business. As a percentage of total revenue, SG&A improved by 90 basis points to 41.2%.
Core adjusted EBITDA Reported at $273 million or 5.6% of total revenue, above last year's 4.2% and the guidance range of 3.3% to 3.7%.
Inventory Increased by 0.7% year-over-year in dollar terms, reflecting tariff-related cost increases. On a unit basis, inventories were down.
Operating cash flow Year-to-date operating cash flow was $247 million, compared to an outflow of $30 million last year.
Free cash flow Reported as an outflow of $183 million, an improvement from an outflow of $492 million last year.
Capital expenditures Decreased to $525 million from $649 million last year.
Shareholder returns Returned $350 million to shareholders through $149 million in dividends and $201 million in share repurchases.
New product introductions: Introduced brands like Rodd & Gunn, Reiss, Prada Beauty, and expanded Barbour, Mackenzie-Childs, and MFK. Added new designer brands at Bloomingdale's such as Totême, TWP, Zimmermann, Victoria Beckham, Christian Louboutin, and Roger Vivier.
Category performance: Fine jewelry, watches, handbags, men's career, and ready-to-wear outperformed, while active categories were softer.
Luxury market expansion: Bloomingdale's achieved a 9% comp growth, its best in 13 quarters, and expanded its brand offerings. Bluemercury also grew with a 1.1% comp increase, driven by dermatological skincare and new brand partnerships.
Omnichannel and digital growth: Macy's nameplate benefited from digital growth, including Macy's marketplace, and the off-price concept Backstage.
Operational efficiencies: Opened a new state-of-the-art distribution center in China Grove, North Carolina, incorporating automation, robotics, and AI to improve delivery speed and reduce costs.
SG&A expense management: Reduced SG&A expenses by $40 million year-over-year, leveraging revenue growth and cost containment efforts.
Bold New Chapter strategy: Focused on three pillars: reimagining Macy's, accelerating luxury, and modernizing operations. Achieved three consecutive quarters of better-than-expected results and two quarters of comparable sales growth.
Customer experience enhancement: Improved Net Promoter Scores and customer feedback, with initiatives like selling education and curated product assortments.
Tariff Impact: The company faced a 50 basis point tariff impact on gross margin, though mitigation actions helped reduce the impact. This remains a challenge for cost management and profitability.
Consumer Behavior: The company noted that consumers are becoming more discerning about spending, which could impact sales and revenue growth, especially during the holiday season.
Store Closures: The closure of 64 non-go-forward stores contributed to a $160 million sales decline compared to the prior year, impacting overall revenue.
Economic Uncertainty: The company continues to incorporate a cautious outlook on consumer spending into its guidance, reflecting broader economic uncertainties.
Inventory Management: While inventory levels were in line with expectations, tariff-related cost increases and the need for disciplined inventory management remain challenges.
Competitive Landscape: The company faces competitive pressures in the retail sector, requiring continuous innovation in product offerings and customer experience to maintain market share.
Operational Costs: Ongoing investments in go-forward business operations and new distribution centers, while necessary, add to operational costs and require careful management to ensure profitability.
Asset Sale Gains: The company revised its expectations for asset sale gains downward, impacting adjusted EPS guidance and reflecting challenges in monetizing underproductive stores.
Fourth Quarter Guidance: Net sales expected to be approximately $7.35 billion to $7.5 billion. Comparable sales projected to be down approximately 2.5% to flat, with go-forward comparable sales down 2% to flat. Core adjusted EBITDA as a percent of total revenue expected to be 9.4% to 10.1%. Adjusted EPS forecasted at $1.35 to $1.55.
Full Year 2025 Guidance: Net sales projected to be approximately $21.475 billion to $21.625 billion. Comparable sales expected to be flat to up 0.5%, with Macy's, Inc. Go-Forward comparable sales flat to up roughly 1%. Gross margin as a percent of net sales anticipated to be 37.7% to 37.9%. Adjusted EPS raised to $2 to $2.20.
Gross Margin Outlook: Gross margin for the full year expected to be 37.7% to 37.9%, reflecting effective tariff mitigation efforts. Tariff impact estimated at 40 to 50 basis points, equating to roughly $0.25 to $0.35 of EPS.
Capital Expenditures: Capital expenditures for the year projected to be $525 million, down from $649 million spent last year.
Luxury Segment Growth: Bloomingdale's and Bluemercury expected to continue growth, with opportunities to expand distribution, increase digital penetration, and open additional small-format and outlet locations.
Operational Enhancements: New China Grove distribution center to enhance delivery speed and reduce costs, supporting future operational efficiency.
Dividends Paid: $149 million in consistent quarterly cash dividends were returned to shareholders in the third quarter.
Share Repurchase: $201 million worth of shares were repurchased, including $50 million in the third quarter. Approximately $1.2 billion remains on the buyback authorization.
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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