Macy’s stock Down 13.7% on Q2 Earnings Reports

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Macy’s (NYSE: M) has been a staple of American retail for over a century, but in Q2 CY2024, the iconic department store faced a challenging environment that reflected the shifting dynamics of consumer behavior and broader economic trends. Despite delivering a robust earnings performance, Macy’s sales struggled, leading to a revised outlook that has left investors cautious.

Key Earnings Highlights
In the second quarter of 2024, Macy’s reported a non-GAAP earnings per share (EPS) of $0.53, a significant 80% beat over the $0.29 expected by analysts. This marked a notable improvement from the $0.26 EPS in the same quarter last year. The company also generated $5.10 billion in revenue, slightly surpassing expectations of $5.05 billion, despite being 3.5% lower than the previous year.

One of the most encouraging signs from the report was the improvement in gross margins, which rose to 42.3% from 39.8% in the same period last year. This growth was driven by cost-cutting measures, including reduced promotional activity and better inventory management, resulting in a higher EBITDA margin of 8.6%, up from 6.5% in Q2 2023.

A Revised Outlook: Caution Amidst Uncertainty
Despite these positive earnings figures, Macy’s revised its full-year revenue guidance downward, projecting net sales between $22.1 billion and $22.4 billion. This is a decrease from the previous forecast of $22.3 billion to $22.9 billion, indicating a challenging environment ahead. The company also lowered its full-year EPS guidance to $2.72 at the midpoint, missing analyst estimates by 2%.

Macy’s (NYSE: M) CEO, Tony Spring, highlighted the difficulties the company is facing, citing selective consumer spending and an increase in promotional activities as key factors contributing to the lowered forecast. “As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle,” Spring noted.

Consumer Behavior Shifts and Store Closures
The retail landscape is evolving, with consumers becoming more discerning about where they spend their money. Macy’s has been attempting to adapt to these changes by closing underperforming stores and focusing on more profitable locations. The company announced earlier this year that it plans to shutter about 150 of its namesake stores by 2027, while investing in the remaining 350 locations.

Technical Outlook
Macy stock, (NYSE: M), is presently experiencing a notable decline of 13.3%. This decline has resulted in the stock trading below several key moving averages, including the 50-day, 100-day, and 200-day moving averages. The daily price chart reveals a bearish symmetrical triangle pattern, indicating potential further downward movement. Additionally, the stock is currently oversold, which is reflected in a relatively weak Relative Strength Index (RSI) reading of 39.78. This low RSI suggests that the selling pressure may be dominating the market sentiment for Macy stock (NYSE: M) at this time.

Interestingly, while Macy’s flagship brand saw a decline in comparable sales by 3.6%, its beauty brand Bluemercury continued to perform well, with comparable sales rising 2%—marking its 14th consecutive quarter of growth. This highlights the divergent performance within Macy’s portfolio, with some segments thriving