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Macy’s jumps as earnings exceed expectations, outlook raised

Nov. 17, 2022 Updated Thu., Nov. 17, 2022 at 5:52 p.m.

Packages are displayed at the Macy's flagship store in New York on Jan. 6, 2022.   (Jeenah Moon/Blomberg )
Packages are displayed at the Macy's flagship store in New York on Jan. 6, 2022.  (Jeenah Moon/Blomberg )
By Olivia Rockeman Bloomberg

Macy’s succeeded in luring shoppers despite a trend away from discretionary purchases amid high inflation, resulting in third-quarter earnings that beat expectations and giving the retailer confidence to raise its full-year guidance.

Adjusted earnings per share were 52 cents in the quarter ended Oct. 29, Macy’s said in a statement, above analysts’ average estimate of 19 cents.

The company raised each end of its annual earnings guidance by 7 cents a share, to a range $4.07 to $4.27. The average estimate was $4.09.

The department store retailer’s multibrand strategy is helping it navigate a U.S. economy where most consumers have become more conscientious in recent months due to stubbornly high inflation and rising borrowing costs.

It’s being helped by two of its chains, Bloomingdale’s and Bluemercury, whose higher-income customers are more protected against changes in the economy.

“We know that customers from a pricing standpoint are looking for value,” Chief Financial Officer Adrian Mitchell said on a conference call.

The company’s shares rose 7.9% to $21.27 at 9:35 a.m. in New York trading.

The stock fell 25% this year through Wednesday, compared with 17% for the S&P 500 Index.

Macy’s is managing its inventories better than some other apparel peers, thanks in part to digital tracking and fewer private-label goods, which makes it easier for the company to cancel orders.

In the third quarter, inventories were up 4%, reflecting “disciplined inventory management,” the company said.

While same-store sales fell 4.4% at the flagship Macy’s chain, the company benefited from its brands that cater to higher-income customers.

Comparable sales rose 5.3% at Bloomingdale’s and 14% at Bluemercury.

“Some of this disparity is the result of the top end of the market being relatively insulated from the economic pressures which plague the middle market,” Neil Saunders, managing director of GlobalData, wrote in a note to clients.

In addition, he said, Bloomingdale’s has a better-defined brand clarity than Macy’s, and nicer stores.

Macy’s is at risk of an “ebbing tide which will drive much softer performance” over coming quarters, particularly because of the more ragged nature of the flagship chain’s stores, Saunders wrote.For the fourth quarter, Macy’s said earnings may be $1.47 to $1.67 a share, trailing the estimate of $1.84.

“The biggest headwind still remains around inflation,” Mitchell said on the call. “That’s really affecting consumers’ ability to spend on discretionary categories.”

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