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Macy’s shares surge on Q3 earnings beat and raised outlook

Macy's shares surge on Q3 earnings beat and raised outlook © Reuters.

NEW YORK – Macy’s Inc. (NYSE:) shares soared in premarket trading today after the company reported third quarter results that exceeded Wall Street forecasts and provided an optimistic outlook for the future. The retailer saw its shares climb by 12.13% ahead of the market opening, signaling investor confidence in the company’s performance and strategic direction.

Macy’s announced a decline in third-quarter sales year-over-year (YoY) to $5.04 billion, a 7.3% drop from the previous year, but still managed to surpass analyst estimates of $4.83 billion. Despite the decrease in revenue, Macy’s gross margin rate improved significantly, rising from 38.7% to 40.3%. This increase was attributed to a combination of fewer permanent markdowns, better management of freight expenses, and a strategic shift in merchandise mix.

The company’s disciplined approach to inventory management resulted in a 6% YoY reduction and a 17% decrease compared to 2019 levels. This leaner inventory is seen as a positive move, especially as Macy’s heads into the crucial holiday shopping season with what CEO Jeff Gennette described as a “healthy inventory position.”

In terms of profitability, Macy’s non-GAAP earnings were reported at $0.21 per share for the quarter, down from $0.52 per share a year ago. However, the company’s gross margin on a GAAP basis increased to 42.4%, up from 41.1% last year, indicating stronger operational efficiency.

Looking ahead, Macy’s raised its full-year revenue and earnings per share (EPS) guidance. For fiscal year 2024, the company now expects revenue to be between $22.9 billion and $23.2 billion with an EPS forecasted at $2.88 to $3.13, which is above consensus estimates.

Gennette expressed confidence in Macy’s portfolio of brands as leading destinations for gift-giving, highlighting the company’s exclusive product offerings, streamlined promotions, and an enhanced shopping experience for customers.

Despite challenges such as stagnant mall traffic, competition from off-price retailers, fast-fashion brands, and online-first competitors, Macy’s has leveraged its scale to offer competitive prices to consumers.

The retailer has faced revenue declines over the past four years, averaging a drop of 1.4% annually. Nonetheless, with a market capitalization of $3.45 billion and over $364 million in cash reserves, Macy’s stands as one of the larger entities within the consumer retail industry.

Following the earnings report and updated guidance, Macy’s stock price increased by 4%, trading at $13.12 per share within a 52-week range of $10.54 to $25.12. The positive reaction from investors reflects confidence in Macy’s strategies amidst a challenging retail landscape.

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