Macy’s Inc. (NYSE:M) reported its third-quarter fiscal 2023 results, surpassing both top and bottom-line expectations according to the Consensus Estimate. However, these metrics showed a decline compared to the figures reported in the same period of the previous fiscal year. The decline in comparable sales was observed on an owned and an owned-plus-licensed basis.

Shares of Macy’s have experienced a 16.1% decrease over the past three months, outpacing the industry’s 7.9% decline.

Sales & Earnings Overview

Macy’s reported adjusted earnings of 21 cents per share, beating the Consensus Estimate of breakeven earnings. Nevertheless, this marked a decline from the adjusted earnings of 52 cents per share reported in the year-ago fiscal period.

Total revenues of $5,038 million surpassed the consensus estimate of $4,772 million, but it reflected a 7% decrease from the figure reported in the year-ago fiscal quarter. Comparable sales declined by 7% on an owned basis and 6.3% on an owned-plus-licensed basis compared to the prior-year fiscal quarter. The anticipated decline in comparable sales was 8.5% on an owned basis and 8.2% on an owned-plus-licensed basis.

Digital sales at Macy’s dropped 7% from the prior-year fiscal quarter, while brick-and-mortar sales decreased by 7% compared to the third quarter of 2022. Net credit card revenues were $142 million, up by 31.1% from the year-ago fiscal period, representing 2.9% of sales.

Brand-Specific Performance

Macy’s Brand: Comparable sales declined by 7.6% on an owned basis and 6.7% on an owned-plus-licensed basis. Strength in beauty, men’s tailored, women’s career sportswear, and off-price with Backstage contributed positively, while women’s casual sportswear, big-ticket, and handbags experienced softness.

Bloomingdale’s Brand: Comparable sales dropped by 3.2% on an owned basis and 4.4% on an owned-plus-licensed basis. Strength in beauty, shoes, women’s contemporary apparel, and outlet locations drove results, while men’s, home, and designer handbags faced challenges.

Bluemercury Brand: Comparable sales increased by 2.5% on an owned basis, driven by strength in skincare and color cosmetic categories.

Margins and Financial Aspects

The gross margin was 40.3%, slightly higher than the estimated 40.2%, and increased from 38.7% reported in the prior-year fiscal quarter.

Selling, general & administrative (SG&A) expenses, as a percentage of net sales, increased by 230 basis points year over year to 40.5%.

Guidance

Macy’s revised its fiscal 2023 sales and earnings outlook based on the third-quarter results. The outlook considers risks related to the uncertain macroeconomic climate, consumer pressures, and the flexibility to respond to intra-quarter demand trends. Net sales are projected to be $22.9-$23.2 billion, with comparable owned plus licensed sales expected to decline 6-7% year over year. Digital sales are expected to constitute about one-third of net sales.

The gross margin for fiscal 2023 is anticipated to be in the range of 38.4% to 38.5%, and adjusted earnings per share are projected between $2.88 and $3.13. Capital expenditures for the fiscal year are estimated to be about $950 million.

For the fourth quarter of fiscal 2023, management forecasts net sales to be $7.95 billion to $8.25 billion, with an anticipated improvement of at least 220 basis points in gross margin year over year. The bottom line is expected to be in the range of $1.85-$2.10 per share, and inventories are predicted to be nearly flat on a percentage basis year over year.

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