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Macy's turnaround starts to take shape, but ailing stores weigh on quarterly results
MMacy's(M) CNBC·2025-03-06 11:55

Core Viewpoint - Macy's is experiencing mixed results as it navigates a turnaround under CEO Tony Spring, with pressure from activist investors seeking to take the company private [1][10]. Financial Performance - Comparable sales for Macy's during the holiday quarter decreased by 1.1%, while comparable sales across owned and licensed businesses, plus online marketplace, increased by 0.2%, marking the highest growth since Q1 2022 [2]. - The "First 50" locations, which are prioritized in the turnaround plan, reported a 0.8% increase in comparable sales, showing positive performance for four consecutive quarters [3]. - For fiscal 2025, Macy's anticipates adjusted earnings per share between 2.05and2.05 and 2.25, and sales between 21billionand21 billion and 21.4 billion, which are below Wall Street expectations of 2.31pershareand2.31 per share and 21.8 billion in sales [4]. - The reported net income for the fiscal fourth quarter was 342million,or342 million, or 1.21 per share, compared to a loss of 128million,oralossof47centspershare,ayearearlier[4].−Totalsalesfellto128 million, or a loss of 47 cents per share, a year earlier [4]. - Total sales fell to 7.77 billion, down approximately 4% from 8.12billionayearprior[5].StrategicInitiatives−CEOSpringhasinitiatedaplaninvolvingtheclosureof150storesandinvestmentinbetter−performinglocationstoaddresslongstandingissues[7].−Thecompanyisfocusingonenhancingstaffing,merchandising,andvisualpresentationinthe50prioritizedlocations,whichhaveshownbetterperformancethantherestofthechain[8].−Afterthestoreclosures,Macy′swillretainabout350locations,andextendingthesuccessfulstrategytothebroaderchainwillrequiretimeandcapital[9].ActivistInvestorInfluence−ActivistinvestorBaringtonCapitalhastakenapositioninMacy′s,advocatingforcost−cuttingmeasures,potentialsalesofluxurybrands,andareviewoftherealestateportfolio[10].−ThereisskepticismregardingthemotivationsofBaringtonandotheractivistinvestors,withconcernsthattheymayprioritizeshort−termprofitsoverlong−termrevitalizationefforts[11].ShareholderReturns−Macy′sannouncedplanstoresumesharebuybacksunderaremaining8.12 billion a year prior [5]. Strategic Initiatives - CEO Spring has initiated a plan involving the closure of 150 stores and investment in better-performing locations to address longstanding issues [7]. - The company is focusing on enhancing staffing, merchandising, and visual presentation in the 50 prioritized locations, which have shown better performance than the rest of the chain [8]. - After the store closures, Macy's will retain about 350 locations, and extending the successful strategy to the broader chain will require time and capital [9]. Activist Investor Influence - Activist investor Barington Capital has taken a position in Macy's, advocating for cost-cutting measures, potential sales of luxury brands, and a review of the real estate portfolio [10]. - There is skepticism regarding the motivations of Barington and other activist investors, with concerns that they may prioritize short-term profits over long-term revitalization efforts [11]. Shareholder Returns - Macy's announced plans to resume share buybacks under a remaining 1.4 billion authorization, contingent on market conditions [13]. - The company aims to enhance customer experience, operational excellence, and maintain healthy free cash flow while returning capital to shareholders through buybacks and dividends [13].