Macy's on Wednesday reported that second quarter net sales fell 1.1% to $5.57 billion, from $5.64 billion in the year-ago quarter. Comparable sales on an owned basis in the quarter were flat year over year; on an owned-plus-licensed basis, comparable sales rose 0.5%, according to a company press release. It was the department store's third consecutive quarter of comparable sales growth, the company said.
Net income attributable to Macy's shareholders totaled $166 million, or 3% of sales, up from $111 million or 2% of sales last year. Excluding impairment and other costs, settlement charges and losses on early retirement of debt, net income totaled $219 million, or 3.9% of sales, the company said.
Macy's updated its guidance for fiscal 2018; The company now expects total sales to range from flat to a 0.7% increase and comparable sales on an owned-plus-licensed basis to increase between 2% and 2.5% for the second half of the year, (which translates to an annual increase of between 2.1% and 2.5%). Comparable sales on an owned basis are expected to be 20-30 basis points below comparable sales on an owned-plus-licensed basis, consistent with prior guidance.
With a shift in timing of a major sales event, Macy's results may be better tracked throughout the first half of the year rather than quarter by quarter. With the second quarter year-over-year impact of the department store's spring Friends & Family shift to the first quarter, comparable sales rose by a more respectable 2.9% on an owned and licensed basis, noted GlobalData Retail Managing Director Neil Saunders in comments emailed to Retail Dive.
Macy's said Wednesday that in the first half of the year, net sales rose 1.1% to $11.11 billion, from $10.99 billion last year, and that, year over year, first-half comparable sales on an owned basis rose 1.9% and on an owned-plus-licensed basis rose 2.3%.
"We are equally encouraged by the continued expansion of the bottom line, where net income rose by a strong 60%," Saunders said. "This is mostly thanks to better inventory control and the growth of own-label sales, both of which have helped to ease up margins."
Moody's Investors Service also took note of the calendar shift, adding that "Macy's solid second quarter results reflects its continued efforts to enhance the customer experience across all points of contact, whether in-store, online or through mobile," according to comments emailed to Retail Dive from Moody's department store analyst Christina Boni. "Macy's also continues to right size its balance sheet with the voluntary reduction of approximately $344 million of debt in the quarter."
But Macy's has far to go in a turnaround that previously seemed to be gaining significant traction. The company is posting relatively muted results in a robust economy, and Saunders warns that it's losing market share and is likely suffering for not having rolled out its holistic strategy to the full store fleet yet. "Many shops remain underinvested in and have a down-at-heel feel," he said. "While things like better inventory control and an enhanced assortment are helping to raise the bar, they are insufficient to propel growth. To drive that Macy's needs to make more substantive investments across its fleet."
Unless they can speed things up, some of those stores will eventually shutter, he said. That would add to Macy's unprecedented store closures of the last year or so. The company's Backstage off-price segment is expanding more rapidly than changes to full-line stores. That could boost sales, but many experts worry that it will siphon them from the flagship.