Shares of Macy’s M fell 2.2% during the trading session yesterday, as investors digested the news of a delay in fiscal third-quarter 2024 earnings release. The delay is related to the discovery of accounting irregularities for delivery expenses.
An investigation revealed that a former employee intentionally hid about $132 million to $154 million in delivery costs between the fourth quarter of fiscal 2021 and the third quarter of fiscal 2024. During this period, the company reported approximately $4.36 billion in delivery expenses. To complete an independent investigation, Macy’s postponed its earnings release and now expects to publish full results by Dec. 11.
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Details of Macy’s Q3 Preliminary Results
Macy’s has reported a 2.4% year-over-year decline in net sales, totaling $4.742 billion. Comparable sales (Comps) dropped 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis from the prior-year quarter. While Macy’s First 50 locations, Bloomingdale’s and Bluemercury showed sales growth, this was outweighed by underperformance in its other non-First 50 locations, the company’s digital channel and cold-weather categories.
Macy's ongoing business comps, including both go-forward locations and digital platforms across all nameplates, decreased 2% on an owned basis and 0.9% when including owned, licensed and marketplace channels.
Net credit card revenues were $120 million, down 15.5% from the year-ago period due to net credit losses. Macy’s Media Network revenues climbed 13.9% to $41 million due to higher advertiser and campaign counts.
Macy’s Brand-wise Sales Insights
Comps across Macy’s declined 3% year over year on an owned basis and 2.2% on an owned-plus-licensed-plus-marketplace basis. Strong performance was noted in fragrances, dresses, and men’s and women’s active apparel categories. Coms at the First 50 locations increased 1.9% year over year on both an owned and an owned-plus-licensed basis, indicating the positive impact of investments in staffing, merchandising, visual presentation and events that resonated with customers.
At Bloomingdale’s brand, comps increased 1% on an owned basis and 3.2% on an owned-plus-licensed-plus-marketplace basis. This growth was fueled by strong demand for contemporary apparel, beauty and digital offerings.
Comps at Bluemercury brand rose 3.3% on an owned basis, marking its 15th consecutive quarter of comps growth. Customers remained highly engaged with the extensive range of skincare products.
Macy’s Financial Health Snapshot
M ended the fiscal third quarter with cash and cash equivalents of $315 million, with $2.77 billion in available borrowing capacity under its asset-based credit facility, accounting for current borrowings and letters of credit. Total debt was $2.87 billion, including $86 million in short-term borrowings under the credit facility, with no significant long-term debt maturities until fiscal 2027. During the quarter, the company voluntarily reduced its debt by $220 million through a previously announced tender offer.
Merchandise inventories increased 3.9% year over year, driven by improved inventory composition and supply-chain efficiencies. Approximately half of this increase was attributed to the transition to cost accounting. Heading into the fiscal fourth quarter, the company is confident in its inventory's freshness and readiness for the holiday season.
Macy’s Strategic Asset Monetization
Macy’s generated $66 million in asset sale gains during the quarter. This gain implies the company’s strategic monetization of non-go-forward assets as part of its Bold New Chapter initiative.
Wrapping Up
While Macy’s faced challenges due to internal financial issues and a delay in the earnings release, it saw positive performance in certain brands and categories. Strong growth at Macy’s First 50 locations, Bloomingdale’s and Bluemercury helped to offset weaker results elsewhere. The company has been focusing on improving its financial health and inventory management with plans to report full results soon. Shares of this Zacks Rank #3 (Hold) company have risen 3.8% in the past three months compared with the Retail – Regional Department Stores industry’s 13.4% growth.
Key Picks
Some better-ranked stocks are Deckers Outdoor Corporation DECK, The Gap, Inc. GAP and Gildan Activewear Inc. GIL.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ fiscal 2025 earnings and sales indicates growth of 12.6% and 13.6%, respectively, from fiscal 2024 reported levels. DECK has a trailing four-quarter average earnings surprise of 41.1%.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 37.8% and 1.3%, respectively, from fiscal 2024 reported figures. GAP has a trailing four-quarter average earnings surprise of 101.2%.
Gildan is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of North America’s apparel market. It currently carries a Zacks Rank #2.
The consensus estimate for Gildan’s current financial-year earnings and sales indicates growth of 15.6% and 1.5%, respectively, from figures of 2024. GIL has a trailing four-quarter average earnings surprise of 5.4%.
5 Stocks Set to Double
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Today, See These 5 Potential Home Runs >>Macy's, Inc. (M) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
The Gap, Inc. (GAP) : Free Stock Analysis Report
Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report
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