Macy’s raises annual profit outlook on strong Q1 results
Shoppers’ return to occasion dressing helped to power Macy’s fiscal first-quarter results, and the department store chain raised its annual earnings outlook even as surging inflation is crimping Americans’ budgets.
The performance, announced Thursday, was among the few bright spots in a pile of reports from retailers that showed the impact of rising costs for everything from labor to shipping. Macy’s, along with others, is also adjusting to quickly changing shopping behavior as consumers go back to the office and resume normal lives. They’re going out to restaurants and doing more activities while buying less stuff that focuses on activities around the home.
Such factors flummoxed a number of retailers. Department store chain Kohl’s cut its annual earnings and sales forecast last week. It noted that some shoppers are trading up to premium brands, while others are trading down to lower priced private-label items. And mall-based teen clothing retailer Abercrombie & Fitch posted a first-quarter loss and cut its outlook on Tuesday. Target reported last week that its profit tumbled 52% from last year. The chain said a lightening quick return by consumers to more normalized spending left it with bloated inventory of items including TV sets that must be marked down to sell.
But Macy’s said shoppers in all income tiers, including those with household incomes under $75,000, increased their spending, though inflation is putting more pressure on the lower-income customer. The company said that its wide portfolio from upscale Bloomingdale’s to off-price Backstage helped keep its customers who were shifting their habits. It saw a faster-than-expected shift away from pandemic-related items like home accessories and casual clothing and more toward dress up clothes, Macy’s sweet spot. Still, it was able to get rid of unwanted inventory through its sophisticated pricing tools.
“While macroeconomic pressures on consumer spending increased during the quarter, our customers continued to shop,” said Macy’s CEO Jeff Gennette in a statement. “We saw a notable shift back to occasion-based apparel and in-store shopping, as well as continued strength in sales of luxury goods. “
Macy’s said that it earned $286 million, or 98 cents per share, for the three-month period ended April 30. That compares with $103 million, or 32 cents per share, for the year-ago period. Adjusted earnings per share were $1.08, above estimates for 82 cents per share, according to FactSet.
Sales rose 13.5% to $5.35 billion from $4.71 billion. Analysts were expecting $5.33 billion for the quarter.
Sales at stores opened at least a year rose 12.4% for the quarter. The figure includes business from licensed owned businesses like cosmetics.
Online sales rose 2% as more shoppers returned to stores.
The company said it expects earnings per share for the year in the range of $4.53 to $4.95. That’s up from the previous forecast of $4.13 per share to $4.52 per share. Analysts were expecting $4.33 per share for the year.
The company’s shares rose $1.97, or a little over 10%, to $21.18 in early morning trading.
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