Macy's says Q4 sales to come in at low end of guidance

At the ICR Conference in Orlando Monday morning, Macy's CEO Jeff Gennette offered a measured assessment of its holiday season performance, a bellwether of what's to come from competitors.

Why it matters: The new guidance — now between $8.16 billion and $8.4 billion for net sales — is a decline versus Q4 2021 for the parent of both Macy’s and Bloomingdale’s, and is not encouraging given high single-digit inflation.

Details: This new guidance faces Q4 2021 comps of net sales of about $8.67 billion when comparable sales increased 28.3%.

• Macy's noted that Black Friday and Cyber Monday sales were in line with expectations and that sales the week before and after Christmas were above expectations.
• Sales during early November and the first weeks of December took a bigger hit than expected.
• Categories such as self-purchase and home goods suffered in particular.

Of note: The department store operator did not take unplanned markdowns or chase unprofitable sales, Gennette said in his presentation.

• Gross margin and earnings per share will both be within the forecasted range.
• Also, comparable growth was going to be difficult versus 2021, which was a record year for many retailers both in terms of year-over-year growth and revenue.

What's next: Macy's digital marketplace, Macy's Media Network, and its off-mall concept Market by Macy's offer growth opportunities.

• The company has already opened 10 Market by Macy's locations and plans to open many more in places such as Atlanta, and in some locales is replacing a big-box mall store, such as in Chesterfield, a suburb of St. Louis.
• And Macy's Media Network is beginning to contribute to the company's overall profitability, Gennette says.

• Lastly, Bloomie's, which is a smaller square footage version of Bloomingdale's, is opening in new markets.

By the numbers: Macy's is in a position to invest $3 billion over the next three years including $1.2 billion this year.

• It's aiming for low single-digit revenue growth and double-digit EBITDA growth.

What we're watching: As one of the first reports on the holiday season from a large retailer, this has implications for how competitors might perform.

The bottom line: Even as Macy's closes its traditional mall stores, and says it has more pruning plans, it's seeing opportunities to expand digitally and physically with smaller square footage formats.