Macy's (M) -) shares moved lower after the retailer posted better-than-expected fiscal-second-quarter earnings and reiterated its full-year profit forecast, following sharp discounts to shed excess inventory over the summer months.
Adjusted earnings for the three months ended July 29 came in at 26 cents a share, beating the analyst consensus estimate of 13 cents a share. Group net sales fell 8.4% to $5.13 billion, topping analysts' estimates of a $5.09 billion tally. Same-store sales were down 8.2%; they'd been forecast to fall 6.5%.
Heavy discounting on spring and winter items, as well as what it described as '"weakened demand trends" heading into the summer months, are the likely forces behind Macy's profit drop.
Gross margin, as a result, narrowed 1.3% from a year earlier to 38.1%, while expenses as a percentage of revenue were up 3.5% to 37.5%.
“Our teams surgically implemented clearance markdowns and promotions to effectively clear spring seasonal receipts and ensure fresh assortments for the fall and Holiday seasons," said Chief Executive Jeff Gennette.
“We continue to see uncertainty in the macroeconomic environment," he added. "We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand.”
Macy's reiterates full-year sales outlook
Earlier this spring, Macy's slashed its full-year profit forecast. It "moved quickly to take the appropriate actions to meet current consumer demand and manage our expenses" to reflect "incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year."
The retailer reiterated that it expected full-year net sales in the region of $22.8 billion to $23.2 billion, down from a prior forecast of $23.7 billion to $24.2 billion. Adjusted earnings, the group said, will likely come between $2.70 to $3.20 per share.
Macy's shares were at last check were off 9.4% at $13.35. This year through the close of Monday's trading, the stock had given up 29%.
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