Macy’s Inc. (NYSE: M) recently announced third-quarter 2024 results, exceeding revenue expectations but revealing an accounting error that led to a lowered annual profit forecast and a subsequent stock decline. The company reported sales of $4.74 billion, surpassing the anticipated $4.72 billion consensus.
Table Content:
Q3 Performance: Mixed Results and Strategic Shifts
Despite beating revenue projections, Macy’s experienced a 2.4% decrease in net sales, with comparable sales declining by 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis. Growth in key areas like the Macy’s First 50 locations, Bloomingdale’s, and Bluemercury was counterbalanced by weaker performance in non-First 50 locations, digital channels, and cold weather product categories.
Bloomingdale’s showcased positive momentum with a 1.4% increase in net sales and comparable sales growth of 1.0% (owned basis) and 3.2% (owned-plus-licensed-plus-marketplace basis), driven by strong performance in contemporary apparel, beauty, and digital. Bluemercury also reported solid growth with a 3.2% rise in net sales and a 3.3% increase in comparable sales.
Accounting Error and Revised Guidance
In November, Macy’s delayed its Q3 earnings release to conduct an independent investigation into an accounting discrepancy. The investigation revealed that an employee intentionally misrepresented accounting entries related to small package delivery expenses, concealing approximately $151 million in cumulative costs from Q4 2021 through Q3 2024.
This accounting error significantly impacted Macy’s financial outlook. While the company reported adjusted earnings per share (EPS) of $0.04, exceeding the $0.03 consensus, this figure was down from $0.21 a year ago. Consequently, Macy’s revised its full-year guidance:
- Sales: $22.3 billion – $22.5 billion (previously $22.1 billion – $22.4 billion, consensus $22.42 billion)
- Comparable Sales: Down ~1.0% to ~flat (previously down ~2.0% to down ~0.5%)
- Adjusted EPS: $2.25 – $2.50 (previously $2.34 – $2.69, consensus $2.73 including the accounting error)
Leadership Perspective and Forward-Looking Statements
Macy’s Chairman and CEO, Tony Spring, emphasized the company’s commitment to its “Bold New Chapter” strategy and expressed optimism about the continued growth in key areas. He highlighted the consistent sales improvements in Macy’s First 50 locations and the robust performance of Bloomingdale’s and Bluemercury, noting that comparable sales trends for the current quarter are exceeding Q3 levels across the portfolio.
Conclusion: Navigating Challenges and Adapting to Change
Macy’s Q3 results present a complex picture of both successes and challenges. While the company demonstrated strength in specific segments and exceeded revenue expectations, the accounting error and subsequent downward revision of the annual profit forecast underscore the importance of robust internal controls and accurate financial reporting. Moving forward, Macy’s will need to address the fallout from the accounting issue while continuing to execute its strategic initiatives to navigate the evolving retail landscape. The company’s ability to adapt and innovate will be crucial in maintaining its competitive edge and delivering long-term value to shareholders.
