NEW YORK-- Macy’s, Inc. (NYSE: M) today reported financial results for the second quarter of 2023 and updated its annual guidance.
“In the second quarter, we delivered better-than-expected top and bottom-line results,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Our teams surgically implemented clearance markdowns and promotions to effectively clear spring seasonal receipts and ensure fresh assortments for the fall and Holiday seasons.”
“We continue to see uncertainty in the macroeconomic environment. We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand,” continued Gennette. “Looking ahead, we are committed to fortifying our core business and improving our customer experience while investing in our five growth vectors. We believe these advancements, enabled by our strong talent, will drive our relevancy and long-term success as a modern department store.”
Second Quarter Highlights
Comparisons are to the second quarter of 2022 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance. Please refer to note 2 within the financial tables regarding reclassifications of certain prior year metrics.
Diluted loss per share of ($0.08) and Adjusted diluted earnings per share of $0.26.
This compares to diluted earnings per share of $0.99 and Adjusted diluted earnings per share of $1.00 in the second quarter of 2022.
Diluted loss per share in the second quarter of 2023 includes a non-cash settlement charge related to the transfer of pension obligations for certain retirees and beneficiaries under the company’s pension plan.
Net sales of $5 billion, down 8% versus the second quarter of 2022.
Brick-and-mortar sales decreased 8% versus the second quarter of 2022.
Digital sales decreased 10% versus the second quarter of 2022.
Comparable sales down 8.2% on an owned basis and down 7.3% on an owned-plus-licensed basis.
Highlights of the company's nameplates include:
Macy’s comparable sales were down 9.2% on an owned basis and down 8.2% on an owned-plus-licensed basis.
41.5 million active customers shopped the Macy’s brand, on a trailing twelve-month basis.
Star Rewards program members made up approximately 72% of Macy's brand comparable owned-plus-licensed sales on a trailing twelve-month basis, up approximately 3 percentage points versus the prior twelve-month period.
The nameplate saw strength in beauty, particularly fragrances and prestige cosmetics, women’s career sportswear, men’s tailored and off-price with Backstage, while active, casual and sleepwear remained challenged.
Bloomingdale’s comparable sales on an owned basis were down 2.7% and on an owned-plus-licensed basis were down 2.6%.
4.0 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis.
The nameplate saw strength across beauty, women’s contemporary and designer apparel, shoes and the outlet locations, while handbags, men’s and dresses were soft.
Bluemercury comparable sales were up 5.8% on an owned basis.
Approximately 736,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis.
The nameplate saw strength in skincare and color cosmetic categories during the quarter.
Other revenue of $150 million, an $84 million decrease.
Represented 2.9% of net sales, down from 4.2% in the prior year period.
The decline was driven by credit card revenues which were negatively impacted by an increased rate of delinquencies across all stages of aged balances within the portfolio. While the company had expected delinquencies to rise as part of the normalizing credit environment, the speed at which the increase occurred for the company and the broader credit card industry since the company’s first quarter earnings call was faster than expected. This negatively impacted second quarter results and led to an increase in the portfolio’s bad debt outlook. Second quarter 2023 credit card revenues include the pro-rata recognition of the updated annual bad debt outlook.
Inventory turnover, on a trailing twelve-month basis, was roughly flat to 2022 and up 15% to 2019.
Merchandise inventories were down 10% year-over-year and down 18% to 2019, reflecting ongoing disciplined inventory management and the clearance of excess spring seasonal product. The company continues to focus on ensuring that merchandise inventories are current, contain compelling product, and are at the appropriate receipt levels based on expected sales demand.
Gross margin rate for the quarter was 38.1%, down from 38.9% in the second quarter of 2022.
Merchandise margin declined 130 basis points, due to heightened levels of clearance markdowns and promotions needed compared to the prior year to clear through spring seasonal product. Unfavorable category mix shifts and a shift in the timing of shortage recognition were partially offset by better inbound freight charges from the company’s costs savings efforts. Shortage in the second quarter of 2023 was informed by a June physical inventory count in certain categories.
Delivery expense as a percent of net sales decreased 50 basis points from the prior year primarily due to improved carrier rates from contract renegotiations as well as lower fuel costs and lower vendor direct volume.
Selling, general and administrative (“SG&A”) expense of $2.0 billion, a $31 million decrease.
SG&A expense as a percent of total revenue was 37.5%, 300 basis points higher compared to the second quarter of 2022, reflecting the decline in sales year-over-year.
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