Macy’s Inc Outperforms Holiday Quarter Estimates with Strong Profit Forecast
Macy’s Inc, the operator of department stores, has exceeded expectations for the holiday quarter and forecast a significant profit that surpassed analysts’ expectations. The company aims to curb promotions to bolster its margins, resulting in a 10% surge in its shares on Thursday.
As with many retailers, Macy’s offered considerable discounts during the holiday season to reduce excess inventory and attract value-conscious consumers. Nevertheless, General Manager Jeff Gennette noted that these promotions were “competitive but measured.”
“We strategically reduced prices and did not intentionally pursue unprofitable sales,” Gennette added.
As a result, Macy’s margins decreased by 2 percentage points to 34.1%, compared to 10 percentage points for Kohl’s Corp.
Macy’s projects that its adjusted earnings per share for the full year will be between $3.67 and $4.11, compared to the average analyst forecast of $3.84.
Despite the predictions of a slight revenue and earnings decline, “they are ambitious compared to their peers,” remarked CFRA Research analyst Zachary Warring.
Retailers, such as Walmart Inc and Target Corp, had to provide cautious forecasts for the year due to stubbornly high inflation and an uncertain economic climate.
According to IBES data from Refinitiv, the company forecasts sales of between $23.7 billion and $24.2 billion for 2023, compared to the median estimate of $24.29 billion.
Macy’s Inc exceeds estimates for the holiday quarter and predicts a high profit
Macy’s Inc, the department store operator, has outperformed predictions for the holiday quarter and forecast a significant profit that surpassed analysts’ expectations. The company’s shares rose by 10% on Thursday due to its strategy of reducing promotions to increase margins.
Balancing discounts with profits
Similar to other retailers, Macy’s offered substantial discounts during the holiday season to clear excess inventory and attract budget-conscious consumers. However, General Manager Jeff Gennette emphasized that the promotions were “competitive but measured.”
In other words, the company aimed to offer competitive prices without sacrificing profitability. Gennette stated, “We strategically reduced prices and did not intentionally pursue unprofitable sales.”
Impact on margins
As a result, Macy’s margins fell by 2 percentage points to 34.1%, while Kohl’s Corp’s margins decreased by 10 percentage points. The difference in margin decline demonstrates Macy’s successful balancing act between sales and profitability.
A positive outlook
Macy’s expects its adjusted earnings per share for the full year to be between $3.67 and $4.11, compared to the average analyst forecast of $3.84. While revenue and earnings may decline slightly, CFRA Research analyst Zachary Warring remarked that Macy’s predictions are “ambitious compared to their peers.”
Challenges for retailers
Several retailers, including Walmart Inc and Target Corp, provided cautious forecasts for the year due to high inflation and an uncertain economic environment. Macy’s success in this climate shows that its strategic pricing decisions have put the company in a strong position.
Sales forecast
Macy’s forecasts sales of between $23.7 billion and $24.2 billion for 2023, according to IBES data from Refinitiv. This figure is slightly lower than the median estimate of $24.29 billion, but it still shows a positive outlook for the company’s future.