Macy's, Inc. (NYSE:M) has delivered first-quarter earnings that beat expectations but warned of weakening demand in its discretionary categories, sending its shares lower in pre-market trading.
The department store operator reported a 7% decline in 1Q net sales to $5 billion from a year earlier, with physical store sales decreasing 7% and digital sales falling 8%.
Its gross margin rate improved to 40%, up from 39.6% a year earlier.
Net income for the quarter fell 46% to $155 million, while adjusted diluted earnings per share (EPS) came in 48% lower at $0.56, but above the $0.45 expected by Wall Street analysts.
“During the first quarter, we delivered a solid beat on our gross margin rate and bottom line expectations enabled by our disciplined teams, strength of our inventory management and operational efficiencies,” chairs and CEO Jeff Gennette said in a statement.
“We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories."
The retailer has revised its full-year 2023 guidance down and now expects sales of $22.8 billion to $23.2 billion, down from its March forecast of $23.7 billion to $24.2 billion.
Adjusted diluted EPS are expected to be in a range of $2.70 to $3.20 for the year, down from $3.67 to $4.11 previously.
“We have moved quickly to take the appropriate actions to meet current consumer demand and manage our expenses,” Gennette added.
“Our revised guidance reflects incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year.”
Macy’s shares were down 4% at $13.05 shortly before the market opened.
Contact the author at stephen.gunnion@proactiveinvestors.com