NEW YORK -- Macy's cut its outlook for the year Tuesday despite topping Wall Street expectations as it faces a glut of unsold inventory it needs to clear out amid a consumer pullback.
The department store earned $275 million, or 99 cents per share, in the three-month period that ended July 30, or $1 if one-time charges are removed. That easily topped the per-share earnings of 86 cents that industry analysts had expected, according to a survey by FactSet.
It far exceeds the $345 million profit the company posted during the same stretch last year.
Sales slipped roughly 1% to $5.6 billion, but that was also stronger than anticipated.
Sales at stores opened at least a year fell 1.5%, or 1.6% including licensed businesses like cosmetics. Online sales fell 5%.
“We delivered sold results despite the challenging environment, said CEO Jeff Gennette.
Americans continued to shop despite rising inflation, Gennette said.
Macy's cut orders where it could to better sync with customer demand, but Gennette said inventory in some categories remains high. The company is cutting prices on seasonal goods, private label and pandemic-related merchandise like casual wear and home furnishings to clear it, he said.
Americans are under financial pressure from inflation hovering near four-decade highs, and that played out in the financial performance at other retailers this quarter.
Shoppers are trading down to cheaper brands, looking for discounts and making fewer visits to the stores.
Kohl’s last week slashed its sales and profit expectations for the year, a result of its stepped up price cutting to shed unwanted merchandise. Both Target and Walmart released quarterly earnings last week that also showed shoppers were cutting back and sticking to essentials.
Soaring prices have forced families to grow more cautious with spending, cutting back on new clothing, electronics, furniture and almost everything else that is not absolutely necessary. Adding to retailers' problems: as the threat of the pandemic eases, Americans’ spending habits have shifted faster than anyone expected. After being cooped up at home, U.S. consumers seemed to shift almost overnight to spending on restaurants, shows or travel.
Still, Macy’s portfolio of businesses from Bloomingdale’s to it's off-price Backstage and wide range of prices offer a big advantage over other retailers as consumer behavior polarizes. Macy’s can flex to take advantage of differences in the trading across various shopper groups and categories.
Shares rose nearly 2% in pre-market trading.
