Macy's (M) is scheduled to report results of its first fiscal quarter before the market open on Wednesday, July 1, with a conference call scheduled for 8:00 am EDT.
1. RESTRUCTURING: On June 25, Macy's announced plans to align its cost base with anticipated near-term sales as the business recovers from the impact of the COVID-19 pandemic, including the closure of stores from March 18 through May 4 and gradual re-opening. The company said it will reduce corporate and management headcount by approximately 3,900. "COVID-19 has significantly impacted our business. While the re-opening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales," said Jeff Gennette, chairman and CEO of Macy's. The company expects the actions announced today to generate expense savings of approximately $365M in fiscal 2020 and approximately $630M on an annualized basis.
2. GUIDANCE: On June 9, Macy's reported a preliminary adjusted Q1 loss per share of ($2.03), compared to analysts' estimates of a ($2.33) loss. Preliminary revenue of $3.017B was in line with the $3.01B consensus. "The COVID-19 pandemic significantly impacted our first quarter sales and earnings results, but I am proud of the way our team navigated this difficult period and maintained the business while our stores were closed," CEO Gennette said. He added that "Our strong digital business sales trend continued throughout May, and it is encouraging to see that as we reopen a store, the digital business in that geography continues to be strong. By June 1, we had approximately 450 stores reopened, with the majority opened in their full format. Our reopened stores are performing better than anticipated."
3. $4.5B IN FINANCING RAISED: On June 8, Macy's said it had raised roughly $4.5B in new financing to help it weather the coronavirus pandemic. The department store said it expects to have “sufficient liquidity” to address the needs of its business during this time of upheaval. This includes purchasing fresh merchandise for the upcoming selling seasons and repaying upcoming debt maturities in fiscal 2020 and 2021. Previous reports indicated Macy's was considering the financing as a way to relieve the pressure from having all of its stores shut during the coronavirus pandemic.
4. 'SETTING THE BAR LOW' FOR Q2: Morgan Stanley analyst Kimberly Greenberger called Macy's preliminary Q1 financial results "largely unremarkable." The analyst lowered her 2020 estimates based on management "setting the bar low" for a similarly weak second quarter. Despite Macy's' ability to obtain alternative financing, her concerns remain regarding future interest burden, ongoing margin deterioration and the potential for permanent market share loss post-COVID, Greenberger said.
5. PEERS: Many of Macy's peers in the department store space are struggling, with J.C. Penney (JCP), Neiman Marcus, and Stage Stores (SSI) all filing for Chapter 11 bankruptcy protection during the pandemic.
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