Macy’s Reports Drop in Sales as New CEO Plans Comeback

Macy’s, the iconic American retailer, has reported a decline in sales for yet another quarter as the company looks to make a comeback under new leadership. Despite the drop in sales, Macy’s managed to exceed Wall Street’s low expectations, posting better-than-expected revenue and earnings. The company’s new CEO, Tony Spring, is determined to engineer a turnaround and has unveiled a growth strategy for 2025 and beyond.

In the fourth quarter, Macy’s revenue declined by 1.7% year over year to $8.12 billion, slightly above estimates of $8.11 billion. Digital sales decreased by 4%, while same-store sales were down 5.4%. However, the company’s net income of $685 million surpassed expectations of $554 million, and its adjusted earnings per share (EPS) of $2.45 beat the expected $1.99.

The decline in sales at Macy’s can be attributed to a decrease in consumer spending on discretionary goods such as women’s shoes and cold-weather apparel. However, there was continued spending on beauty products like fragrances and cosmetics. CEO Tony Spring explained that Macy’s core customers are middle-income consumers with a household income of $75,000 or under. These consumers have been under pressure due to the rising cost of discretionary items, which has affected their ability to purchase non-discretionary items.

Sales at Macy’s luxury chain Bloomingdale’s also saw a decrease of 1.5%, primarily due to softness in men’s lines and designer handbags. However, the company’s cosmetics chain Bluemercury experienced growth in sales by 2.3%. Spring noted that these businesses cater to a more affluent customer base, with most shoppers having a household income of over $121,000 per year. While these consumers are not under financial pressure, they remain cautious about their spending decisions.

For the full fiscal year 2023, Macy’s revenue declined to $23.1 billion, a 5.5% decrease compared to the previous year. Same-store sales were down 6.9%, with digital and in-store sales dropping by 7% and 5%, respectively.

Despite the challenging sales figures, Macy’s stock jumped more than 4% following the announcement. This positive response may be attributed to the company’s rejection of a $5.8 billion buyout offer from one of its shareholders, Arkhouse, and Brigade Capital Management. The original proposal made by Arkhouse would have seen Macy’s go private for $21.00 per share, a 32% premium to the company’s share price at the time.

Arkhouse Management, however, is not giving up without a fight. They have nominated nine candidates for Macy’s board of directors in a proxy battle. This adds another layer of complexity to the company’s efforts to turn things around.

In response to the challenging retail landscape and increased competition from online giants like Amazon and Walmart, Macy’s new CEO Tony Spring has unveiled a growth strategy for the company. Dubbed “A Bold New Chapter,” the plan aims to create a more modern Macy’s that will generate meaningful value for shareholders in the years ahead.

As part of the initiative, Macy’s plans to close 150 underperforming locations, including 50 by the end of this year. The company has not disclosed the specific locations of these stores. Instead of focusing on expansion, Macy’s will concentrate its resources on improving existing stores and product assortment, as well as investing in digital sales. The company also plans to open 15 new Bloomingdale’s stores and 30 new Bluemercury stores in the next three years, while remodeling 30 existing Bluemercury locations.

To better compete with online retailers, Macy’s aims to rationalize and monetize its supply chain, streamline fulfillment processes, and offer a scalable tech platform within the next three years. Spring believes that by focusing on the customer, unlocking real estate value, and increasing dividends, Macy’s can create a more compelling story for investors.

Macy’s is facing significant challenges in a rapidly evolving retail landscape. However, under the leadership of CEO Tony Spring, the company is determined to adapt and thrive. With a bold new growth strategy in place, Macy’s aims to revitalize its business and generate meaningful value for its shareholders in the years to come.