Macy's, Inc. Q2 FY2024 earnings call

Key Points

• Tony Spring mentioned appreciation for teams and progress on Bold New Chapter strategy. First 50 stores at Macy's had 1% comp sales gain. Luxury nameplates Bloomingdale's and Bluemercury had strong gross margin expansion and SG&A management.
• Consumer discretionary environment was stable but became more discriminating due to macroeconomic uncertainty. Macy's adjusted assortments and marketing, while Bloomingdale's and Bluemercury focused on merchandise offerings and events.
• First 50 stores initiatives included improving customer experience, enhancing merchandise, modernizing visuals, with net promoter scores up and traffic/conversion higher. Closing and monetizing non-go-forward locations expected to continue.
• Adrian Mitchell discussed gross margin expansion, SG&A control, inventory levels, and guidance for the year, including net sales, comps, gross margin, and CapEx.

For Macy's, second quarter net sales were $4.9 billion, with comparable sales down 3.6%. The First 50 stores at the Macy's nameplate delivered a 1% comp sales gain. At Bloomingdale's, net sales were down 0.2% and comp sales were down 1.4%. Bluemercury achieved its 14th consecutive quarter of comp store sales growth, with net sales growing 1.7% and comps up 2%. Macy's contributed a significant portion to total sales, while Bloomingdale's and Bluemercury each had their own performance metrics within the luxury segment.

Fiscal 2024 Guidance

• Net sales expected to be approximately $22.1 billion to $22.4 billion.
• Macy's Inc. comps inclusive of non-go-forward and digital down 2% to down 0.5%, Macy's nameplate go-forward and digital down 1.5% to flat, luxury nameplates up 0.5% to up 2%.
• Gross margin as percent of net sales 39% to 39.2%, SG&A as percent of total revenue 36.3% to 36.6%.
• Adjusted EBITDA as percent of total revenue 8.6% to 9%, adjusted diluted EPS outlook $2.55 to $2.90.

Third Quarter Guidance

• Net sales expected $4.7 billion to $4.82 billion, other revenues ~$152 million, gross margin rate ~40.3% to 40.5%, end of quarter inventories up mid-single digits. Adjusted diluted EPS loss $0.04 to earnings $0.01 including asset sale gain.

• Macro-economic uncertainty and complex news cycle affecting consumer behavior.
• Inventory management challenges due to sales results and investment in product strength.
• Potential impact of external factors on promotional landscape and sales volume.

Q: Alex Straton asked about holiday fourth quarter approach and back half comp acceleration.

A: Tony Spring said teams are leaning into more newness and exclusive partnerships. Adrian Mitchell said they're not standing still, making changes in stores, digital, and media mix.

Q: Eric asked about growth from existing vs new customers in First 50 locations.

A: Tony Spring said it's a combination of existing and new customers, with marketing working on geotargeting communication. Adrian Mitchell added on investments in staff, visual presentation, and events to drive traffic and conversion.

Q: Jay Sole asked about asset sale gains and monetization proceeds.

A: Adrian Mitchell said they're pleased with traction, deal pipeline healthy, expecting $115 million in asset sale gains with 55 stores closed vs prior 50.