US' Macy's posts 38.1% gross margin rate in Q2 FY23

Unfavourable category mix shifts and a shift in the timing of shortage recognition were partially offset by better inbound freight charges from the company’s cost savings efforts. Shortage in the second quarter of 2023 was informed by a June physical inventory count in certain categories.

Delivery expense as a per cent of net sales decreased 50 basis points from the prior year primarily due to improved carrier rates from contract renegotiations as well as lower fuel costs and lower vendor direct volume, Macy’s said in a press release.

In the second quarter, the company reported net sales of $5 billion, down 8 per cent versus the second quarter of 2022. Brick-and-mortar sales decreased 8 per cent versus the second quarter of 2022. Digital sales decreased 10 per cent versus the second quarter of 2022. Comparable sales lowered by 8.2 per cent on an owned basis and down 7.3 per cent on an owned-plus-licensed basis.

“In the second quarter, we delivered better-than-expected top and bottom-line results,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Our teams surgically implemented clearance markdowns and promotions to effectively clear spring seasonal receipts and ensure fresh assortments for the fall and Holiday seasons.”

“We continue to see uncertainty in the macroeconomic environment. We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand,” continued Gennette. “Looking ahead, we are committed to fortifying our core business and improving our customer experience while investing in our five growth vectors. We believe these advancements, enabled by our strong talent, will drive our relevancy and long-term success as a modern department store.”

In light of ongoing macroeconomic pressures and uncertainty on when those will abate, the company continues to take a cautious approach on the consumer. The company is reaffirming its annual sales and earnings outlook. Better-than-expected second quarter gross margin, SG&A and interest expense, and a lower annual share count, are expected to fully offset reduced annual credit card revenue and asset sale gain assumptions. The company’s annual shortage assumption has not materially changed from the prior outlook and remains elevated compared to recent historical levels.

Consistent with the company’s prior outlook, its earnings outlook includes the benefit of an incremental $200 million of cost savings identified as part of ongoing expense management that is favourably expected to impact both gross margin and SG&A expense.

Fibre2Fashion News Desk (RR)