Fashion retailer Macy’s, Inc. (M) has reported weaker-than-expected results for the first quarter of 2020, with net sales dropping 45% year-over-year to $3.017 billion. This fell short of consensus estimates by $700 million. Shares in Macy’s have pulled back 1.4% in Wednesday’s pre-market trading.
Meanwhile GAAP EPS came in at -$11.53 with non-GAAP at -$2.03, while gross margin pulled back to 17.1% (vs the expected 21.8%). Although non-GAAP EPS beat Street estimates by $0.47, GAAP EPS missed consensus estimates by an eyebrow-raising $9.02.
That was due to substantial pre-tax, non-cash goodwill and long-lived asset impairment charges of $3.1 billion and $80 million, respectively, with Macy’s citing the fallout from Covid-19 on its business.
“The first quarter of 2020 was challenging for the country, the industry and Macy’s, Inc” acknowledged CEO Jeff Gennette. Looking ahead, he expects these challenges to continue: “While our stores are re-opened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year. We do not anticipate another full shutdown, but we are staying flexible and are prepared to address increases in cases on a regional level.”
The company previously withdrew its 2020 sales and earnings guidance and is not currently providing an updated outlook. However, it did say that it continues to expect a gradual sales recovery.
Nearly all the company’s stores have now reopened, including stores in the major metropolitan regions. Stores continued to perform ahead of expectations through May and June, and the company’s digital business sales remained strong across geographies, Macy’s stated.
Gennette revealed that M has boosted its fulfillment options and health precautions and has taken the necessary actions to stabilize the business and give financial flexibility. “We are confident we have the right strategy and plans in place to navigate the shifting retail landscape,” Gennette concluded.
Overall the stock has now plunged 59% year-to-date, and analysts have a bearish Moderate Sell consensus on the stock’s outlook. That’s with an average analyst price target of $6, indicating shares can fall a further 18%.
“We remain Neutral-rated as we continue to favor KSS in the department store space, and we expect a highly promotional environment and M’s on-mall presence to weigh on results going forward” explained Guggenheim analyst Robert Drbul recently. (See M stock analysis on TipRanks).
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