Macy’s third-quarter sales declined as customers grow more cautious with their spending, but sales and profit both topped Wall Street expectations. The department store also raised the top end of its full-year revenue and adjusted profit forecasts.
Shares surged nearly 7%, or 88 cents, to $13.48 in mid-day trading on Thursday.
Spending by Americans has been an engine for the overall economy, but months of rising prices and higher costs of credit are starting to show. And even though inflation has eased, shoppers are still feeling stretched.
“It’s a highly competitive environment,” Macy’s CEO Jeff Gennette told The Associated Press during a call on Thursday. “The budgets of our customers are definitely pressed. So even though you see the break on the prices across all of our non-discretionary categories, it’s still much higher than it has been historically and certainly in the last year.”
Retail sales slipped in October, according to U.S. data released this week, ending six straight months of gains. Some of that decline was due to falling prices for both gasoline and cars, however.
A flurry of retailers have been reporting quarterly results this week. Also on Thursday, Walmart posted better-than-expected third-quarter results as its low prices attract shoppers looking for deals in a tough economic environment. But it gave a muted outlook and shares slid early.
On Wednesday Target posted better-than-expected profits for its third quarter, but sales slid with customers growing more cautions with their money.
Home Depot had a strong third-quarter, but sales fell there, too. Customers are holding off on larger home renovations and purchases of big-ticket items like appliances, which are often bought using credit cards.
Macy’s, which also runs upscale Bloomingdale’s stores as well as Bluemercury beauty stores, earned $43 million, or 15 cents per share, in the quarter. A year earlier, the company earned $108 million, or 39 cents per share.
Stripping out certain items, earnings were 21 cents per share. Wall Street was calling for breakeven results.
Overall sales fell 7% to $4.86 billion, with sales at traditional stores and online sales both down 7%. Still, that topped the $4.77 billion that analysts polled by Zacks Investment Research were calling for.
Sales at stores open at least a year, a key indicator of a retailer’s health, also dropped 7%. Macy’s same-store sales declined 7.6%, while Bloomingdale’s same-store sales fell 3.2%.
Macy’s now foresees full-year revenue between $22.9 billion and $23.2 billion. Its prior outlook was for revenue of $22.8 billion to $23.2 billion. The company now anticipates adjusted earnings in a range of $2.88 to $3.13 per share. Previously it predicted $2.70 to $3.20 per share.
Last month Macy’s Inc. announced that it was accelerating the expansion of its small-format stores as it looks to cater to shoppers seeking more convenient locations. The department store aims to add up to 30 new small format locations through the fall of 2025, bringing the total number of such stores to roughly 42. The next round of expansion starts in fall 2024.
__AP Retail Writer Anne D’Innocenzio contributed to this report.