Macy's (M) is reporting another quarter of declining sales, a month after turning down a $6.9 billion buyout offer.
On Wednesday, Macy's reported a 3.8% year-over-year decline in net sales to $4.9 billion, missing estimates of $5.06 billion. Same-store sales fell 4%, worse than the expected 0.27% drop. As a result, Macy's stock plummeted over 7% in premarket trading.
Adjusted earnings beat Wall Street's expectations by $0.24, coming in at $0.53. CEO Tony Spring called the quarterly results "strong" against a "challenging consumer environment" in the earnings release.
This report comes after the company ended conversations around a potential buyout bid from one of its shareholders, Arkhouse, and its partner Brigade Capital Management on July 15. The offer first became publicly known early last December.
In a release, Macy's said "continuing diligence is not warranted or in the best interests of shareholders."
Its reasoning included uncertainty around financing of the deal, a "less than compelling value proposed" ($24.80 per share), and the negotiation being a "significant distraction for the management team." The offer represented a roughly 60% premium over Macy's share price on Nov. 30, 2023.
Instead, Macy's is doubling down on its turnaround strategy, dubbed "A Bold New Chapter."
Spring, who took the role this February, introduced the plan in Q1. The strategy includes closing underperforming stores, improving remaining "go forward" locations, and investing in digital sales.
Spring said in the release that same-store sales have increased in the first 50 locations that Macy's has prioritized.
In these 50 locations, where the company is testing new strategies, sales increased 0.8% year over year. Other go-forward stores that did not get an upgrade saw sales decline 3.8%. In the group of stores it plans to close, sales dropped 6.5%.
Morgan Stanley analyst Alex Straton expects "higher market conviction" when "visibility" on the P&L starts to show from its turnaround plan in mid-2025, following initial store closures and investments in 50 high-performing stores.
Shares of Macy's are down 10% this year, compared to the S&P 500's (^GSPC) 18% rise.
Macy's Q2 earnings come as shoppers are growing weary of higher costs and remain on the hunt for deals.
Per a report from Placer.ai, Macy's year-over-year monthly visits were down through most of 2024.
"The chain’s weekly foot traffic has remained at or above 2023 levels since the middle of the month [July] — likely spurred by back-to-school shopping and sales," Placer.ai wrote in a post.
Same store sales for its luxury subsidiary Bloomingdale's dropped 1.1%, but jumped 2% for its cosmetics chain Bluemercury.
UBS analyst Jay Sole said Macy's "structural challenges" will "cause it to lose share to Off-Price retailers, brands, and Amazon."
Discount retailer TJX Companies, Inc. (TJX), the parent company of TJ Maxx, Marshall's, and Home Goods, is set to report Wednesday before market open as well.
Merchandise margin increased 210 basis points, driven by lower year-over-year discounts, the company said.
The earnings rundown
Here's what Macy's reported, compared to Wall Street estimates:
Net sales: $4.9 billion versus $5.06 billion
Adjusted EPS: $0.53 versus $0.29
Same-store sales: -4.0% versus -0.27%
Licensed stores: -3.6% versus 0.63%
Company-owned stores: -4.5% versus -1.04%
The company is expecting ongoing pressure in the back half of 2024, lowering its outlook for the year.
It now expects net revenue to come in between $22.1 billion and $22.4 billion, lower than the previously expected range of $22.3 billion to $22.9 billion.
Same-store sales are expected to be down 2% to 5% year over year. It previously expected same-store sales to be in the range of up 1% to down 1.5%.
—
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
Click here for all of the latest retail stock news and events to better inform your investing strategy