Macy’s earnings beat estimates, but execs send warning signal on health of America’s shoppers

Yet another retail giant took a cautious outlook on consumers.

Macy’s (M) posted a beat on earnings estimates on Tuesday before the market open, but the department store pointed out that its credit card business is under pressure.

In its Q2 earnings report, the company highlighted a decline in credit card revenues, “which were negatively impacted by an increased rate of delinquencies across all stages of aged balances within the portfolio.”

The company said while it 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.”

Read more: What the Fed rate hike means for credit cards

Net revenue came in at $5.13 billion, higher than analysts estimates of $5.1 billion. However, credit card revenue dragged that down the other revenue category for the retailer, which saw a $84 million dollar decrease from last year.

This is part of a larger issue hitting Americans. Consumers were already having a hard time paying off credit card debt, as Yahoo Finance’s Janna Herron reported.

“We continue to see uncertainty in the macroeconomic environment,” Macy’s CEO Jeff Gennette said. “We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand.”

The company reiterated its 2023 guidance. Net sales are expected to be between $22.8 billion and $23.2 billion. Sales are expected to continue to be negative year over year, down 7.5% to down 6%.

Macy’s stock rose initially before moving lower by 1.4% in premarket trading.

The earnings rundown

Here are Macy’s Q2 results versus estimates, according to Bloomberg data.

  • Net sales: $5.13 billion versus $5.10 billion expected

  • Adjusted EPS: $0.26 versus $0.13 expected

  • Same-store sales: -7.30% versus -9.36% expected

  • Gross margin: 38.10% versus $37.95 expected

  • Adjusted net income: 71% versus 35%

  • Inventories: 4,129% versus $4,425%

Inventory was down 10% year over year and down 18% since 2019, as the company cited “ongoing disciplined inventory management and the clearance of excess spring seasonal product.”

Macy's Herald Square store is shown with birds flying in the sky.

Macy’s Herald Square store is shown on August 21, 2023 in New York City. (Photo by Eduardo Munoz/VIEWpress)

What else we’re watching:

Consumers shied away from the items they bulked up on during the pandemic.

The activewear, casual, and sleepwear categories remain challenged, the company said. Meanwhile, categories like beauty — especially fragrances and prestige cosmetics — as well as women’s career sportswear and men’s tailored clothing saw strong sales in Q2.

Over at Bloomingdale’s, the brand saw strength at outlet locations and in beauty, women’s contemporary and designer apparel, and shoes. However, sales of handbags, men’s apparel, and dresses were “soft.”

What analysts said ahead of earnings:

“[Macy’s] provides a good read on the state of the middle income consumer. Management has been cautious about the state of the consumer in past earnings calls and was incrementally more cautious in 1Q when it lowered guidance significantly (from $3.67-4.11 to $2.70-3.20).” -Paul Lejuez, Citi

“Macy’s has done well in managing inventory levels over the past few years, which is beginning to pay off as other retailers watch inventory soar. Macy’s has spent the past eight months paying down its heavy debt load, which should give them more financial flexibility and boost earnings as interest payments fall. We believe Macy’s is in a strong financial position going into a weaker economic backdrop but see little to drive growth moving forward.” -Zachary Warring, CFRA

This story is breaking and being updated.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at

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