Macy's Q1 Earnings & Sales Surpass Estimates, Comps Decline Y/Y

Macy’s, Inc. M has reported first-quarter fiscal 2025 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. However, both metrics decreased from the year-ago quarter figures. Comparable sales (comps) fell on an owned and owned-plus-licensed-plus-marketplace basis.

However, in the fiscal first quarter, the company advanced the execution of its Bold New Chapter strategy, scaling key initiatives that enhanced the customer experience and contributed to stronger-than-expected performance across all three nameplates.

More on Macy’s Q1 Results

The company has reported adjusted earnings of 16 cents per share, surpassing the Zacks Consensus Estimate of 14 cents. However, the bottom line decreased 40.7% from 27 cents in the year-ago period. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Net sales of $4,599 million beat the consensus estimate of $4,458 million. However, the top line dipped 5.1% from the year-ago quarter. Comps fell 2% on an owned basis and 1.2% on an owned-plus-licensed-plus-marketplace basis from the prior-year quarter. The decline in comps was driven by a decrease at Macy’s, partially offset by sales growth at Bloomingdale’s and Bluemercury.

M's ongoing business comps, including both go-forward locations and digital platforms across all nameplates, decreased 1.8% on an owned basis and 0.9%, including owned, licensed and marketplace channels.

Net credit card revenues were $154 million, up 31.6% from the year-ago period. The metric represented 3.3% of sales, up 90 basis points from the year-ago quarter.

Macy’s Media Network revenues increased 8.1% year over year to $40 million. The metric represented 4.2% of sales, up 10 basis points from the year-ago quarter.

Update on M’s Brand Performance

Comps across the Macy’s brand declined 2.9% year over year on an owned basis and 2.1% on an owned-plus-licensed-plus-marketplace basis.

At the Bloomingdale’s brand, comps increased 3% on an owned basis and 3.8% on an owned-plus-licensed-plus-marketplace basis.

Comps at the Bluemercury brand rose 1.5% on an owned basis, marking the 17th consecutive quarter of comps growth.

Insight Into Macy’s Margins & Expenses

The gross margin remained flat year over year at 39.2% as improved merchandise margins were offset by an increase in delivery expenses as a percentage of net sales. Our estimate was pegged at 39.2%.

The Zacks Rank #4 (Sell) company reported selling, general and administrative (SG&A) expenses of $1.91 billion, up 0.1% year over year. Savings from closed locations and operational efficiencies were reinvested into customer-facing initiatives across the company’s core business, including the Reimagine 125 locations, Bloomingdale’s and Bluemercury.

However, as a percentage of total revenues, SG&A expenses rose 170 basis points year over year to 39.9% due to lower net sales. We anticipated a deleverage of 150 basis points in SG&A expenses as a percentage of total revenues.

Macy’s reported an adjusted EBITDA of $324 million, down 11% from an adjusted EBITDA of $364 million in the year-ago quarter. We note that the adjusted EBITDA margin was 6.8%, down 50 basis points year over year.

M’s Financial Snapshot: Cash, Inventory & Equity Overview

The company ended the fiscal first quarter with cash and cash equivalents of $932 million, long-term debt of $2.77 billion, and shareholders' equity of $4.45 billion. Merchandise inventories declined 0.5% on a year-over-year basis. In the first quarter of fiscal 2025, net cash used in operating activities was $64 million.

Asset sale gains totaled $16 million, representing a $15-million increase from the prior period. In the first quarter of fiscal 2025, the company repurchased 8.7 million shares for $101 million. As of the end of the quarter, $1.3 billion remained available under its $2-billion share repurchase authorization.

M Stock Past Three-Month Performance

Peek Into Macy’s FY25 Guidance

For 2025, the company has updated its annual guidance to reflect a range of current factors, including the implementation of new and existing tariffs, a slight pullback in consumer discretionary spending, and an increasingly competitive and promotional retail environment. Despite these headwinds, Macy’s remains confident in its ability to adapt, supported by its solid financial foundation, a diverse mix of brands and product categories, and its positioning across the value spectrum, from off-price to luxury.

The company expects net sales between $21 billion and $21.4 billion for fiscal 2025. Comparable owned-plus-licensed-plus-marketplace sales are projected to decline 0.5-2% year over year, whereas go-forward business comparable owned-plus-licensed-plus-marketplace sales are expected between a 2% dip and flat.

Adjusted EBITDA as a percentage of total revenues has been revised to 7.4-7.9%, down from the previously mentioned 8.4-8.6%. Similarly, core adjusted EBITDA is expected between 7% and 7.5% of total revenues compared with the prior stated 8-8.2%. Adjusted earnings per share are projected between $1.60 and $2.00, down from the earlier mentioned $2.05-$2.25. 

The guidance reflects the impacts of fiscal 2024 store closures, which contributed $700 million to annual net sales.

M shares have lost 14.1% in the past three months compared with the industry’s 1.1% decline.

Stocks to Consider

Some better-ranked stocks are Canada Goose GOOS, Genesco Inc. GCO and Allbirds Inc. BIRD.

Canada Goose is a global outerwear brand. GOOS is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and sales implies growth of 10% and 2.9%, respectively, from the year-ago actuals. Canada Goose delivered a trailing four-quarter average earnings surprise of 57.2%.

Genesco is a Nashville-based specialty retail and branded company that sells footwear and accessories in retail stores. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for GCO’s fiscal 2025 earnings and sales suggests growth of 62.8% and 0.6%, respectively, from the year-ago actuals. Genesco delivered a trailing four-quarter average earnings surprise of 37.2%.

Allbirds is a lifestyle brand that uses naturally derived materials to make footwear and apparel products. It carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for BIRD’s current financial year’s earnings implies growth of 16.1% from the year-ago actual. The company delivered a trailing four-quarter average earnings surprise of 21.3%.

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This article originally published on Zacks Investment Research (zacks.com).

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