– By Sydnee Gatewood
Iconic department store chain Macy’s Inc. (NYSE:M) reported its second-quarter results before the opening bell on Wednesday.
The New York-based retailer, which also owns the Bloomingdale’s and Bluemercury brands, posted an adjusted loss of 81 cents per share. This was better than the loss of $1.77 that Refinitiv analysts were anticipating, but down from earnings of 28 cents per share a year ago. Revenue declined 35.8% from the prior-year quarter to $3.56 billion, yet still topped analysts’ expectations of $3.48 billion.
Due to store closures related to the Covid-19 pandemic, comparable store sales declined 35.1% on an owned plus licensed basis. Analysts were projecting a 28.2% decrease. It also recorded a 53% increase in digital sales as consumers favored shopping online even as traditional brick-and-mortar stores began to reopen.
America’s department stores have struggled more than other retailers during the coronavirus crisis, forcing legacy brands like J.C. Penney (JCPNQ) into bankruptcy, and Macy’s is no exception. In June, the company announced it would be reducing its workforce by 3%, or 3,900 corporate jobs, to reduce costs during the pandemic. The layoffs are expected to save it about $365 million in fiscal 2020.
Regardless, Macy’s ended the quarter with a strong liquidity position, recording around $1.4 billion in cash on its balance sheet. In addition, inventories were down 29% from a year earlier.
In a statement, Chairman and CEO Jeff Gennette said Macy’s performance was “driven largely by the sales recovery” of its stores.
“Restarting our stores’ business was our top priority, and we successfully accomplished that while also ensuring that our digital business remained strong,” he said. “Going into this crisis, we had a well-developed digital business and we’re seeing that thrive as we attract new and welcome existing customers back to our brands.”
Looking ahead to the all-important holiday season, Gennette said the company is approaching the second half of the year “conservatively” due to the continued uncertainty surrounding the coronavirus pandemic. While Macy’s did not provide sales and earnings guidance for 2020, it did note it is projecting that same-store sales in the fall season will be down in the low-to-mid 20% range. Profit margins are expected to peak in the third quarter as higher shipping expenses and other holiday-related costs weigh on earnings.
“We are also focused on laying the groundwork for 2021 and beyond,” Gennette said. “We plan to invest in fashion, digital and omnichannel, work with agility, and galvanize the resources of the company to serve our customers and move the Macy’s, Inc. business forward.”
During the earnings call, Gennette told analysts the growth plans include opening smaller Macy’s and Bloomingdale’s stores that are not located in malls, though he still believes “the best malls in the country will thrive.”
After a 6% premarket pop, shares were up 2.71% at $7.20 on Wednesday morning. Sporting a $2.16 billion market cap, GuruFocus estimates the stock has fallen 60% year to date.
Disclosure: No positions.
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This article first appeared on GuruFocus.