Macy’s earnings beat estimates, but executives are sending a warning signal about the health of America’s shoppers

Macy's earnings beat estimates, but executives are sending a warning signal about the health of America's shoppers

Yet another retail giant has taken a cautious view of consumers.

Macy’s (M) beat earnings estimates on Tuesday before the market opened, but the department store noted its credit card business was under pressure.

In its second-quarter earnings report, the company highlighted a decline in credit card revenue, “which was negatively impacted by an increased delinquency rate across all stages of legacy balances within the portfolio.”

The company said while it expects “delinquencies to rise as part of the normal credit environment, the speed at which the increase has occurred for the company and the broader credit card industry since the company’s first-quarter earnings announcement has been faster than expected.”

Read more: What does the Fed rate hike mean for credit cards?

Net revenue came in at $5.13 billion, above analyst estimates of $5.1 billion. However, credit card revenue lagged behind the retailer’s other revenue category, which saw a decline of $84 million from last year.

This is part of a larger issue affecting Americans. Consumers were already having difficulty paying off credit card debt, as reported by Jana Heron of Yahoo Finance.

“We continue to see uncertainty in the macro environment,” said Jeff Genet, CEO of Macy’s. “We are leveraging our powerful data science tools to improve inventory composition, while reading and reacting to changing consumer preferences to meet demand.”

The company has reiterated its guidance for 2023. Net sales are expected to be between $22.8 billion and $23.2 billion. Sales are expected to remain negative year-over-year, down 7.5% to 6%.

Macy’s stock initially rose before falling 1.4% in premarket trading.

Earnings summary

Here are Macy’s Q2 results versus estimates, according to Bloomberg data.

  • Net sales: $5.13 billion versus the expected $5.10 billion

  • Adjusted EPS: $0.26 vs. $0.13 expected

  • Same store sales: -7.30% vs -9.36% expected

  • gross profit margin: 38.10% for an expected $37.95

  • Adjusted net income: 71% vs. 35%

  • the exams: 4,129% vs. 4,425%

Inventory is down 10% year-over-year and down 18% since 2019, with the company citing “ongoing disciplined inventory management and the liquidation of excess seasonal products in the spring.”

Macy's Herald Square appears with birds flying in the sky.

Macy’s Herald Square store is seen on August 21, 2023 in New York City. (Photo by Eduardo Munoz/VIEWpress)

What else are we watching:

Consumers turned away from items they collected during the pandemic.

The company said its activewear, casual wear and sleepwear categories remain a challenge. Meanwhile, categories such as beauty — particularly prestige fragrances and cosmetics — as well as women’s sportswear and men’s apparel saw strong sales in the second quarter.

At Bloomingdale’s, the brand has seen strength in its outlet locations and in beauty, trendy and designer women’s apparel, and footwear. However, sales of handbags, menswear, and dresses were “soft”.

What analysts said before earnings:

“(Macy’s) provides a good read on the median-income consumer situation. Management was cautious about the consumer situation in previous earnings calls and was increasingly more cautious in the first quarter when it lowered guidance significantly (from $3.67 to $4.11 to $2.70) – 3.20).” – Paul LeGuise, City

“Macy’s has done well managing inventory levels over the past few years, which is paying off as other retailers have been seeing inventory rise. Macy’s has spent the past eight months paying off a heavy debt load, which gives them more financial flexibility and Dividends increase as interest payments fall. We believe Macy’s is in a strong financial position and heading towards a weaker economic backdrop but doesn’t see much to drive growth going forward.” Zachary Waring, CFRA

This story is broken down and updated.

Brooke DiPalma is a correspondent at Yahoo Finance. Follow her on Twitter at @BrookeDiPalma Or email her at

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