NEW YORK (AP) — Macy's profit and sales slid in the third quarter as the department store had to step up discounts amid a pullback from shoppers stung by inflation.
Yet, the New York company topped Wall Street expectations and raised its earnings outlook, in part due to better credit card revenue. Shares rose more than 12% Thursday.
Shares of rival Kohl's rose 2% after it withdrew its annual earnings outlook amid volatile spending, an uncertain economic environment and a CEO transition. Like Macy's, it reported a drop in sales and profit, but beat Wall Street expectations.
Major retailers have reported mixed performances for the third quarter this week, illustrating how volatile the exit from a pandemic has been. Target posted a 52% drop in third-quarter profits after it was forced to slash prices with Americans feeling the squeeze of inflation. The Minneapolis retailer also voiced caution about its sales and profit during the fourth quarter. Walmart, which has a more robust grocery aisle and is the nation's largest retailer, reported better-than-expected earnings and raised its earnings outlook.
What's clear is that shoppers are waiting for deals and not paying full price. They're being far more choosy when it comes to discretionary items because of inflation. Moreover, Target, Macy's and Kohl's all noted a slowdown in spending in the last few weeks as the kickoff to the holiday shopping season approaches, which could force retailers to cut prices even further.
It's a different scenario compared with a year ago when shoppers were buying early because supply chain issues were delaying orders. There were few price cuts because inventories were lean.
“Visibility for the fourth quarter has been as difficult as any period I can remember,” Kohl's chairman Peter Boneparth told analysts on a call Thursday. “You had last year a situation where nobody had inventory. All customers were inclined to buy early. Now, we flip over, everybody has a lot of inventory.”
Macy's posted net income of $108 million, or 39 cents per share for the three-month period ended Oct. 29. That compares with $239 million, or 76 cents per share for the year-ago period. Adjusted results were 52 cents per share, far exceeding the per-share earnings of 18 cents that Wall Street had expected, according to a survey by FactSet.
Sales slipped 3.9% to $5.23 billion from $5.44 billion in the year-ago period, but that also beat expectations.
Comparable sales — those from established stores and from online — slipped 2.7% including licensed businesses compared with the year ago quarter, but it was up 6% compared with the third quarter of 2019, before the pandemic.
Online sales fell 9% compared with the third quarter of 2021, but they were up 35% compared with the third quarter of 2019.
“We know the consumer is under increasing pressure and has choices on where to spend,” said Macy’s CEO Jeff Gennette.
Gennette said the company’s upscale Bloomingdale’s store has also fared well as wealthy shoppers continue to spend.
Gennette told the AP on a call Thursday that shoppers' focus on sales merchandise will make the period between Thanksgiving and Christmas "more intense.” He said that Macy's is ready to ramp up discounts when needed.
Macy's and Kohl's took a blow at the beginning of the pandemic as they were forced to close stores for a few months, but sales rebounded in 2021 when Americans began to refurnish homes or buy casual clothing as they stayed close to home. Shoppers were also flush with government stimulus money.
But Americans dramatically shifted away from pandemic-fueled spending as the virus eased, and that has left a number of retailers with excess inventory that is now being sold at discounted prices. Elevated prices for food, rent, gasoline and almost everything else have also redirected spending toward necessities, which hurts clothing stores.
Kohl's, which caters to mostly middle income shoppers, has been more vulnerable than Macy's, which caters to a variety of income groups.
In August, Macy's said it cut orders where it could to better sync with customer demand. It has also cut prices to clear than inventory. But on Thursday, it said it has made good progress in clearing some of that merchandise.
Kohl's posted net income of $97 million, or 82 cents per share, for the three-month period ended Oct. 29. That compares with $243 million, or $1.65 per share in the year-ago period.
Sales dropped 7% to $4.27 billion.
Analysts were expecting 77 cents on $4.07 billion, according to FactSet.
Third-quarter comparable sales decrease 6.9%.
There is a lot going on outside of sales at Kohl's. CEO Michelle Gass said this month she's leaving for the top post at Levi Strauss. There has also been heavy pressure from big stakeholders in the company for changes in leadership.
Kohl's board has formed search committee to find a new CEO. Director Tom Kingsbury is serving as interim CEO.
“I think everybody believes that Christmas will come but I don’t think anybody out there knows for sure exactly what’s going to happen, ” Boneparth said.
Shares of Macy's rose $2.40 to $22.10, while shares of Kohl's rose 63 cents to $30.42 Thursday.
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