Macy’s Inc. reported a 3.8% drop in net sales to $4.9 billion for the second quarter, missing analyst expectations. For its fiscal Q2 ended Aug. 3, Macy’s saw a 3.3% decline in comparable sales, including online sales, across its brands, which also include luxury names Bloomingdale’s and Bluemercury.

Macy’s attributed the declines to more budget-conscious consumers and economic challenges. The department store chain is also navigating a turnaround plan, which involves closing 150 stores over the next three years and upgrading the 350 that stay open.

Macy’s online sales in Q2

When excluding the stores it plans to close, Macy’s in-store and online sales decreased a relatively smaller 3.3% in Q2.

“As the quarter progressed, our customers became more discerning, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle,” Macy’s CEO Tony Spring told investors during the earnings call.

Meanwhile, revenue from Macy’s Media Network increased to $34 million in Q2. That’s up 13.3%, or $4 million.

Macy’s is No. 14 in the Top 1000 Database, where Digital Commerce 360 categorizes it as an Apparel & Accessories retailer. The Digital Commerce 360 database ranks North America’s largest online retailers by their annual web sales. Digital Commerce 360 projects Macy’s total web sales in 2024 will reach $7.30 billion.

Macy’s web sales by year

Ending buyout talks and financial performance

During the second quarter, Macy’s ended seven months of buyout talks with Arkhouse Management and Brigade Capital, citing the lack of a “compelling” offer with guaranteed financing. The board announced the decision in July after the $6.9 billion bid wasn’t deemed sufficient enough to take the retailer private.

Financially, the Macy’s flagship brand remained its most underperforming during the quarter. Net sales across Macy’s store locations and online channels fell 4.4%, while comparable sales were down 3.6%. That sales metric covers the products Macy’s owns, brands that rent space in its stores, and its third-party online marketplace.

The retailer’s luxury brands, Bloomingdale’s and Bluemercury, performed better. Bloomingdale’s comparable sales saw a 1.4% decline on an owned-plus-licensed basis. Bluemercury continued its growth with a 2% increase in comparable sales, marking its 14th consecutive quarter of gains.

“We’re confident in the future of these two nameplates and believe our initiative sets us up well to take additional luxury market share,” Spring said.

Macy’s turnaround plan progress and online sales in Q2

To navigate these challenges, Macy’s has been accelerating its turnaround plan. The retailer has already revamped its first 50 stores, seeing a 1% increase in comparable sales for these locations in the second quarter. This marks its second consecutive quarter of growth since the plan launched in February.

“These locations also had higher traffic and conversion relative to other go-forward locations,” Spring told investors in the earnings call.

Spring, who became Macy’s CEO in February, stressed the “meaningful progress” made with the overhaul, known as the Bold New Chapter strategy. He said Macy’s now plans now to close 55 underperforming stores by the end of 2024, up from the original 50. The remaining 100 will close over the following months, leaving Macy’s with 350 stores by 2026.

As part of the transformation, Macy’s has been increasing staff in its handbags and shoe departments in the first 50 stores, with plans to expand this to 100 more stores this fall, he said.

The company is also investing in digital improvements, including website improvements, search engine optimization, and a better mobile experience, Spring said. He noted that digital orders are now being delivered faster than they were last year.

“We obviously have the ‘first 50’ initiative and we have our digital business,” Spring said. “And what we have focused on is trying to win by market.”

The plan also includes investments that “have improved the customer experience through faster online delivery and higher product in stocks, while contributing to strong bottom-line performance and cash flow generation,” said Adrian Mitchel, chief financial officer and chief operating officer, on the earnings call.

Macy’s downgrades sales forecast

Macy’s also lowered its annual sales forecast for fiscal 2024. Macy’s now projects net sales between $22.1 billion and $22.4 billion. That’s down from a May estimate of $22.3 billion to $22.9 billion. This is also a decline from the $23.1 billion reported for fiscal 2023.

Mitchell cited the second-quarter results and a more challenging business environment as the primary reasons.

“We will continue to invest in near-term sales-driving efforts and longer-term Bold New Chapter initiatives while prioritizing efficiency and effectiveness in non-customer-facing areas,” Mitchell said during the call.

Macy’s fiscal Q2 highlights

For its fiscal second quarter ending Aug. 3, 2024, Macy’s reported:

• Net sales declined 3.8% to $4.9 billion.
• Macy’s comparable sales, which include online sales, were down 3.3% on an owned-plus-licensed-plus-marketplace basis.
• Macy’s nameplate comparable sales fell 3.6% on an owned-plus-licensed-plus-marketplace basis.

Check back for more earnings reports. Click here to read last quarter‘s Macy’s earnings article.

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