Macy's delayed Q3 results show sales decline as its stock drops

Macy's (M) on Wednesday posted its official third quarter results after it concluded an internal investigation into an employee hiding up to $151 million of expenses that led to a delay in reporting.

The tepid earnings report was broadly in line with the preliminary results shared last month.

Macy's reported adjusted earnings per share of $0.04, which beat Wall Street's expectation of $0.03. Net sales declined 2.4% from a year ago to $4.74 billion, versus $4.75 billion expected. Same-store sales declined 1.3%, compared to estimates of 1.39%.

The company lowered its full-year profit guidance as it closes stores in a turnaround push. It now expects adjusted profit per share of $2.25 to $2.50, versus its prior forecast of $2.34 to $2.69.

Macy's stock price fell 10% before the bell on Wednesday. Per Yahoo Finance data, shares are down 25% year to date, compared to the S&P 500's (^GSPC) 28% gain.

The retailer rejected a $24.80 per share buyout offer earlier this year from Arkhouse and Brigade Capital. It opted to focus on its Bold New Chapter strategy, but lackluster results have ratcheted up activist pressure.

Same-store sales climbed 1.9% at the 50 locations that Macy's is prioritizing. The company expects fourth quarter net sales to come in between $7.8 billion and $8 billion, compared to $8.12 billion in Q4 of 2023.

"We're navigating a competitive discretionary environment," Macy's CEO Tony Spring said. "In this environment, we do see a customer that's very value-oriented." Customers are flocking to clearance and deals, while warmer weather caused a hit on high-margin categories like coats, per Spring.

Here's what Macy's shared in its official third quarter results, compared to Bloomberg consensus estimates:

• Net sales: $4.74 billion versus $4.75 billion expected

• Adjusted earnings per share: $0.04 versus $0.03

• Same-store sales: -1.3% versus -1.39%

Luxury chain Bloomingdale's same-store sales rose 1% for owned locations, driven by apparel, beauty, and its online businesses.

Cosmetics brand Blue Mercury clocked its 15th quarter of positive sales growth, up 3.3%, boosted by its skincare offerings.

The company updated its 2024 guidance. It expects revenue to come in between $22.3 billion and $22.5 billion, versus a prior range of $22.1 billion to $22.4 billion.

Same-store sales growth is expected to be flat to 1% lower year over year, compared to a drop of 2% to 5% previously expected.

As for its accounting investigation, people close to the matter said the employee acted alone, and did not pursue the acts for personal gains.

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The company found an employee intentionally made "erroneous accounting accrual entries" that hid $151 million of cumulative delivery expenses from the fourth quarter of 2021 through the quarter ended Nov. 2, 2024.

Spring said the company is strengthening its existing controls and "implementing additional changes designed to prevent this from happening again."

The employee is no longer with the company, and there was no impact on revenue, cash, or inventory, with all vendors paid properly, Macy's said.

Barington Capital Group and Thor Equities have piled on the pressure for Macy's to improve shareholder value.

The activist shareholders said the shares "do not reflect the upside potential on a reinvigoration in the Macy’s nameplate." They also argued the retailer can do more with Blue Mercury, Bloomingdale's, and its real estate, which they valued at $5 billion to $9 billion.

"Most of their plans seem to be about short-term value creation rather than the long-term protection of the brand," Neil Saunders, GlobalData’s managing director of retail, told Yahoo Finance.

Macy's is expected to start the first wave of 65 store closures this year after earlier projecting just 50. It plans to close a total of 150 locations and posted third quarter asset-sale gains of $66 million.

CFO Adrian Mitchell said the company is seeing "really good dealmaking."

"In terms of sales proceeds, being approximately $275 million forecasted for this year ... That gives us capital to invest in the go forward [locations] and capital to return to our shareholders," Mitchell said on the earnings call.

Morningstar analyst David Swartz said he's not confident in the turnaround strategy, given this is the latest of three in the last decade. "The last two did not generate a lot of value for shareholders," he said.

"Store closures in the past have not improved same-store sales growth or other metrics ... people are understandably waiting to see if anything works here."

Barington and Thor's demands are already being addressed by Macy's, and the ultimate intention may be to gain influence over the board or the company, Swartz added.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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