© Reuters. FILE PHOTO: A customer exits the Macy’s flagship department store in midtown Manhattan in New York City, U.S., December 11, 2023. REUTERS/Brendan McDermid/File Photo
By Katherine Masters and Savyata Mishra
NEW YORK (Reuters) -Macy’s on Tuesday forecast annual sales and profit below expectations and said it would shutter about 150 stores through 2026 as part of a new plan that would help save $100 million in costs this year.
Its shares rose 7% as the department store chain also beat quarterly profit estimates. They have lagged peers in 2023, declining about 3% compared to a 13% jump in rivals Nordstrom (NYSE:) and Kohl’s (NYSE:).
The locations made up for less than 10% of Macy’s (NYSE:) annual sales and were mostly underperforming mall-based stores, CFO Adrian Mitchell told Reuters. No additional layoffs were planned due to the closures.
Sluggish sales have landed the upscale retailer in the crosshairs of activist shareholders and attracted potential bidders, while it also faces a proxy battle from Arkhouse Management after it nominated nine candidates to its board.
“Cutting off the unproductive tail will have immediate benefits for the sales productivity and profitability of the company,” Mari Shor, senior analyst at Columbia Threadneedle said.
The new plan is in addition to Macy’s decision in January to close five stores and cut 2,350 jobs, or 3.5% of its overall workforce. The retailer had stores in 718 locations as of fourth quarter end.
“Fiscal 2024 will be a transition and investment year”, CEO Tony Spring said on a conference call, adding he expects Macy’s to return to consistent sales and profit growth from 2025.
It also said it would open 15 Bloomingdale’s locations and at least 30 new Bluemercury stores over the next three years to accelerate growth for its better-performing luxury brands.
Its holiday-quarter comparable sales declined 4.2% on an owned-plus-licensed basis, better than analysts’ estimates of 5.8% drop, as steep discounts drew shoppers.
However, net credit card revenue fell 26% to $195 million, in a sign that economic pressure, particularly among its low- and middle-income customers, led to higher bad debts.
Macy’s took a $1 billion charge in the fourth quarter related to the restructuring. Excluding items, it earned $2.45 per share, above LSEG estimates of $1.96.
It expects 2024 net sales between $22.2 billion to $22.9 billion, compared to analysts’ average estimate of $22.95 billion.
It forecast adjusted earnings per share between $2.45 and $2.85, the midpoint of which is below expectations of $2.76.
