Macy’s Inc. (M, Financial) released its fourth-quarter results on Feb. 25 before the market opened. The company posted stronger-than-expected earnings and revenue thanks to “meaningful sales uptick” during the last 10 shopping days prior to Christmas.
Earnings highlights
The department store chain recorded earnings of $2.12 per share for the quarter, which surpassed analysts’ projections of $1.96 per share. Revenue was $8.34 billion, topping expectations of $8.32 billion.
Comparable store sales dipped 0.5%, both on owned and licensed basis, down from a growth of 0.7% witnessed in the year-ago quarter. The company attributed the decline to warmer weather as well as poor customer traffic at some malls. Analysts had projected a 0.9% drop in comps.
Reflecting on the company's performance, Chairman and CEO Jeff Gennette said:
“We were pleased with the significant trend improvement in the fourth quarter, including a meaningful sales uptick in the 10 shopping days before Christmas. Together with disciplined expense management, our solid sales results in the fourth quarter allowed us to deliver stronger-than-expected earnings results. Importantly, we exited the year with a clean inventory position.”
Efforts for improvement
As a mall-based store, Macy's is under pressure as more and more consumers shop online. Therefore, the company is focussing on upgrading its stores’ interiors and enhancing its product assortment.
The department store chain announced a major transformation earlier this month. As per the announcement, the company is looking forward to close down 125 stores in the coming three years. In addition, the company is planning to cut 9% of its corporate staff and shut some offices in Cincinnati and San Francisco. This move will help the company save as much as $1.5 billion on a yearly basis through fiscal 2022, which will partly be ploughed back into its growth initiatives such as launching more of its off-price backstage locations.
Outlook
Macy’s provided revised 2020 guidance based on the quarter’s performance.
The company projects comps, both on owned and owned plus licensed basis, to decline between 1.5% and 2.5%. Adjusted diluted earnings per share is projected to be between $2.45 and $2.65. The company estimates revenue to fall within a range of $23.6 billion to $26.9 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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