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Shares of Macy’s, Inc. (NYSE: M ) rose more than 2% on Friday. Shares are down 15% year-to-date and 28% over the past 12 months. The company experienced a decline in sales and profits during the most recent quarter and its margins were also affected by higher discounts and promotions. Here’s a look at the retailer’s expectations and plans for fiscal year 2023:
sales
In the fourth quarter of 2022, Macy’s net sales fell 4.6% to $8.3 billion from the same period a year ago. Sales were down 0.9% from the fourth quarter of 2019. Comparable sales were down 3.3% on an owned basis and down 2.7% on an owned-plus-license basis versus Q4 2021. The company is looking at categories like dresses, beauty , baggage and gifts extend during the quarter when categories like soft front, active and casual are challenging.
Looking ahead to FY2023, Macy’s believes consumer spending allocations will continue to move away from the discretionary category. Despite this change, the company believes that there is an opportunity because trends like the hybrid work model provide flexibility for personal travel and the desire of consumers to go on vacation or attend events is not reduced, and therefore the request for gifts and requests may continue. along.
For FY2023, Macy’s expects net sales to be between $23.7-24.2 billion, representing a low single-digit decline on a year-over-year basis. The outlook reflects the company’s belief that consumers will be under more pressure in 2023 compared to 2022. Equivalent sales on a 52-week plus license basis are expected to decline by around 2-4% YoY.
Macy’s expects year-over-year sales performance to be softer in the first half of 2023 than in the second half. For the first quarter of 2023, the company expects net sales of $5.0-5.1 billion.
Profitability
In Q4 2022, Macy’s GAAP EPS fell 25% to $1.83 while adjusted EPS fell 23% to $1.88 compared to the prior year. Adjusted EPS is expected to be $3.67-4.11 in FY2023. For Q1 2023, the company expects adjusted EPS of $0.42-0.48.
In the fourth quarter, Macy’s gross margin fell to 34.1% from 36.5% last year. Merchandise margins declined during the quarter primarily due to higher markups and promotions. This higher markdown is part of the company’s efforts to end the year with proper inventory levels. For FY2023, gross margin is estimated at 38.7-39.2%.
Shop outside the mall
In the quarterly conference call, Macy’s mentioned that one of the main growth vectors is small format stores in malls, which play an important role in supporting omni-channel capabilities. The company currently has eight Market by Macy’s stores and two Bloomies outside the mall, which are about one-fifth the size of the locations inside the mall.
For five Markets by Macy’s and one Bloomies store that has been open for more than a year, same-store sales for licensees increased by 8% and 12% in Q4 2022. compared to mall locations. In the call, it said that malls have 2.5 times more visits than malls. Also seen is lower cannibalization of existing markets and higher rates of new customer acquisition for these stores.
By 2023, Macy’s plans to open four Markets by Macy’s stores and one Bloomies store. Based on the performance of the new store, the company will move forward with plans to accelerate the opening of the mall from 2024.
personal brand
Another growth vector is personal branding. Private brands play an important role in driving customer loyalty and gross margins. Macy’s currently has 24 private label brands, accounting for a total of about 16% of sales in FY2022. Over the next three years, Macy’s plans to evaluate the brand and refresh and replace it to improve and expand its portfolio.
CEO change
Earlier this week, Macy’s announced that CEO Jeff Gennette plans to retire in February 2024. The company has appointed Executive Vice President Tony Spring to replace him. With a new CEO at the helm, Macy’s can look forward to new strategies and initiatives in the coming years.
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