Macy’s Inc. (M) shares experienced a significant decline after the company reported a disappointing second-quarter revenue, falling short of analysts’ expectations. While the fashion retailer reported adjusted earnings per share (EPS) exceeding estimates, the revenue miss and lowered full-year sales forecast sent a wave of concern through the market.
The company reported second-quarter sales of $4.94 billion, missing the consensus estimate of $5.12 billion. Despite the revenue miss, Macy’s reported adjusted EPS of $0.53, exceeding the consensus estimate of $0.29. However, the department store operator lowered its full-year net sales forecast to $22.1 billion-$22.4 billion, a reduction from the previous estimate of $22.3 billion-$22.9 billion and a decline from 2023 sales of $23.09 billion.
Goldman Sachs analyst Brooke Roach expressed concerns about Macy’s disappointing results and reduced full-year sales and comparable sales forecasts. While acknowledging the company’s strong profitability and EPS protection, Roach pointed out that the slowing comparable sales trends across all brands are likely to worry investors, especially compared to other retail formats exhibiting stable growth.
Roach further noted that the updated profit outlook includes slightly higher credit revenue and asset sale gains. However, the analyst seeks more information about the extent of the slowdown across different brands, particularly insights from the early back-to-school season. Roach also emphasized the need for clarity on Macy’s confidence in achieving the revised outlook in a weakened macroeconomic environment, its approach to promotional intensity plans for managing inventory, and opportunities for expanding its successful First 50 initiatives, which saw positive comparable sales during the quarter.
Despite the concerns, Roach maintained a Buy rating on Macy’s stock with a price target of $23. Macy’s stock has shown a positive performance in the past 12 months, gaining around 5%. Investors seeking exposure to Macy’s can consider the Invesco S&P MidCap 400 Pure Value ETF (RFV) and Invesco Exchange-Traded Fund Trust II Invesco S&P MidCap 400 Revenue ETF (RWK).
As of Wednesday’s market close, Macy’s shares were down 12.6% at $15.50. The company’s ability to navigate the challenging retail landscape and restore investor confidence will be crucial in the coming months.
