Macy's forecasts sales hit from steep promotions, uneven demand

By Juveria Tabassum

(Reuters) -Macy's lowered its annual net sales forecast on Wednesday, blaming higher promotions and weak demand for upscale apparel and accessories from deal-hungry consumers in the U.S., sending shares of the department store operator down 7% premarket.

Heading into the busy back-to-school and holiday shopping seasons, Macy's (NYSE:M ) also forecast current-quarter results below estimates and reported a bigger-than-expected fall in net sales for the second quarter.

The results contrast a strong quarter at Walmart (NYSE:WMT ) and Target as the big-box retailers benefited from robust demand for lower-priced essentials.

"Unlike Target and Walmart, Macy's sits in a world that is still disenfranchised by consumers being more discerning about price," said Art Hogan, chief market strategist at B Riley Wealth.

"The good news is this is not a reflection on the U.S. consumer per se as much as it is about the American consumer's preconditioned tone of looking for value."

Macy's has been forced to offer more discounts in some categories to attract lower and middle-income consumers struggling with high borrowing costs.

The department store chain now expects annual net sales of $22.1 billion to $22.4 billion, compared with its prior forecast of $22.3 billion to $22.9 billion.

Second-quarter net sales fell 3.8% to $4.94 billion, compared with analysts' expectations for a 0.23% fall to $5.12 billion, according to LSEG.

Macy's also reported a fall of 1.1% in comparable sales at its Bloomingdale's banner, following a 0.8% rise in the prior quarter.

In July, the company terminated buyout talks with an investor group comprising Arkhouse Management and Brigade Capital on grounds that the bid failed to provide "compelling value". The offer was for $6.9 billion.



Macy's second-quarter adjusted earnings per share of 53 cents beat expectations of 30 cents, as margins grew due to lower costs.

The company maintained its annual profit expectations.

Source: Investing.com