Macy's Cuts Profit Forecast

By Juveria Tabassum

(Reuters) – Macy's on Wednesday cut its annual profit forecast, causing shares to drop 10% due to weak demand at its flagship stores and heavy discounts clouding expectations for the critical holiday shopping season.

The department store chain had previously delayed its quarterly results after discovering that one employee had made incorrect entries to hide approximately $151 million in delivery expenses from the fourth quarter of 2021 through the third quarter of 2024.

Macy's shares have lost nearly 17% of their value this year. To revive sales, the company is closing underperforming stores and relying on its luxury outlets, Bloomingdale's and Bluemercury.

Dana Telsey, analyst at Telsey Advisory Group, stated, "Macy's (NYSE:M) is still facing challenges while operating in a competitive promotional space against an uncertain macro-operating environment with traffic challenges to the category."

Macy's has also faced two activist investor actions this year, the latest from Barington Capital and Thor Equities. As department stores struggle with more consumers shifting online, the investor group has urged Macy's to explore options for Bloomingdale's and Bluemercury and to create a separate unit for its real estate business.

The company's real estate assets, including the flagship Herald Square outlet, are valued at around $5 billion to $9 billion, according to Barington and Thor Equities, while its market capitalization stands at $4.6 billion.

In July, Macy's terminated discussions with Arkhouse Management and Brigade Capital regarding a $6.9 billion takeover bid, citing that it did not present "compelling value."

The company now expects an annual adjusted profit per share of $2.25 to $2.50, a decrease from the prior forecast of $2.34 to $2.69, which was adjusted to account for an estimated full-year delivery expense impact of $79 million.

Macy's executives commented during a post-earnings call, "We're updating our outlook for the competitive and promotional landscape that we're dealing with. We see that the consumer remains under pressure."