On November 16, 2023, Macy's Inc (M, Financial) released its 8-K filing, disclosing its financial results for the third quarter of 2023. The company reported a decrease in net sales by 7% to $5 billion compared to the same quarter in the previous year. Despite the sales decline, Macy's Inc (M) saw an improvement in its gross margin rate, which rose to 40.3% from 38.7% in Q3 2022.
Financial Performance Overview
Macy's Inc (M, Financial) experienced a drop in diluted earnings per share (EPS) to $0.15, down from $0.39 in Q3 2022, and adjusted diluted EPS decreased to $0.21 from $0.52. Comparable sales were down 7.0% on an owned basis and 6.3% on an owned-plus-licensed basis. Digital sales also saw a 7% decrease, reflecting the broader challenges faced by the retail sector.
Despite these challenges, Macy's Inc (M, Financial) managed to reduce merchandise inventories by 6% year-over-year and by 17% compared to 2019, showcasing disciplined inventory management. The company's gross margin rate improvement was attributed to lower permanent markdowns within the Macy's brand and improved freight expense, partially offset by planned changes in Macy's category mix.
Income Statement and Balance Sheet Highlights
The income statement reveals a decrease in net income to $43 million, down from $108 million in the prior year. Selling, general, and administrative expenses (SG&A) saw a $48 million decrease, benefiting from the company's commitment to ongoing expense discipline. The balance sheet shows merchandise inventories at $6.025 billion, and total assets stood at $18.111 billion as of October 28, 2023.
Segment Performance and Customer Engagement
Macy's Inc (M, Financial) reported varying performance across its nameplates. Macy's comparable sales were down, with strength in beauty, fragrances, and prestige cosmetics, while areas like women's casual sportswear faced challenges. Bloomingdale's saw a decrease in comparable sales but experienced strength in beauty and women's contemporary apparel. Bluemercury, on the other hand, posted a 2.5% increase in comparable sales, driven by skincare and color cosmetics.
Updated Guidance and Management Commentary
The company updated its annual guidance, now expecting net sales to be between $22.9 billion and $23.2 billion, with adjusted diluted EPS between $2.88 and $3.13. This updated outlook reflects the risks associated with an uncertain macro-economic climate and the related pressures on consumers.
We delivered better-than-expected top and bottom line third quarter results and are entering the holiday period in a healthy inventory position," said Jeff Gennette, chairman and chief executive officer of Macy's, Inc. He also expressed confidence in the upcoming leadership transition to CEO Tony Spring.
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Conclusion
Macy's Inc (M, Financial)'s third-quarter results reflect a mixed performance amid challenging economic conditions. While net sales have declined, the improvement in gross margin and disciplined inventory management demonstrate the company's ability to navigate the retail landscape effectively. The updated guidance suggests a cautious but potentially stable outlook for the remainder of the year.
Explore the complete 8-K earnings release (here) from Macy's Inc for further details.
