Macy’s (M) reports another quarter of declining sales, a month after turning down a $6.9 billion buyout offer.
On Wednesday, Macy’s reported a 3.8% decline in year-over-year net sales to $4.9 billion, below the $5.06 billion expected. Same-store sales fell 4%, a bigger decline than the 0.27% decline expected. Its stock fell more than 13% in morning trading.
Adjusted earnings beat Wall Street expectations by $0.24, coming in at $0.53. CFO and COO Adrian Mitchell told Yahoo Finance that the consumer “in the discretionary space” is still “under pressure” and looking for value.
The report comes after the company ended discussions about a potential buyout offer from one of its shareholders, Arkhouse, and its partner, Brigade Capital Management, on July 15. The offer was first made public in early December.
Mitchell said: “There was not enough evidence to suggest that a potential transaction was actionable…you have to have the financing to do a transaction.”
He added that the $24.80-a-share offer was “not compelling” given Macy’s potential. Management is now focused on its turnaround strategy, dubbed “A Bold New Chapter.”
The offer represented a premium of about 60% to Macy’s stock price as of Nov. 30, 2023. Mitchell said he was confident the strategy would make Macy’s more valuable than the proposal.
The restructuring of its large real estate portfolio, one of Arkhouse’s main objectives, is underway. The company is expected to announce the first wave of 55 store closures this year, up from the 50 it planned earlier this year. It plans to close 150 in total.
“We are seeing strong growth in real estate monetization,” he said. “We had originally forecast $90 million to $115 million in asset sales gains this year. We are now upgrading that outlook… to about $115 million.”
In the second quarter, the company recorded $36 million in gains on asset sales and expects an additional $30 million in gains in the third quarter and $67 million in the fourth quarter.
CEO Tony Spring, who took over in February, launched “A Bold New Chapter” in the first quarter. The strategy includes closing underperforming stores, improving the remaining “growing” locations and investing in digital sales.
Spring said in the statement that same-store sales increased at the top 50 locations that Macy’s prioritized.
At those 50 sites, where the company is testing new strategies, sales increased 0.8% year-on-year.
“We saw that traffic and conversion in those top 50 Macy’s stores was significantly better than the other stores. When we look at the customers, we see that more absolute customers are coming into those stores. That’s going back to the previous year,” he said.
The other stores that did not benefit from this modernization saw their sales drop by 3.8%. In the group of stores that plan to close, sales fell by 6.5%.
Morgan Stanley analyst Alex Straton expects “greater market conviction” when “visibility” on P&L begins to emerge from its turnaround plan in mid-2025, following initial store closures and investments in 50…
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