Department stores are struggling to attract customers, causing Macy's to lower its sales projections.

• Although Macy's surpassed quarterly earnings predictions, it reduced its full-year sales forecast.
• The company is attempting to revive its business by shutting down approximately 150 stores with the same name.
• Beauty brand Bluemercury was once again Macy's best performing segment.

The department store operator announced Wednesday that it has cut its full-year sales forecast due to the challenge of dealing with selective shoppers and increased promotions.

Wall Street's earnings expectations were exceeded by the retailer, but it fell short on revenue in the mixed quarter.

Macy's now expects net sales to be between $22.1 billion and $22.4 billion, lower than its previous range of $22.3 billion to $22.9 billion, and a year-over-year decline from the $23.09 billion reported in fiscal 2023.

Macy's anticipates comparable sales, excluding the effects of store openings and closures, to fall between a decrease of approximately 2% and a decline of approximately 0.5%. Previously, the company predicted comparable sales to range from a decline of about 1% to a gain of 1.5%. This metric includes both owned and licensed sales, which encompasses merchandise that Macy's owns and items from brands that pay for space within its stores, as well as Macy's third-party online marketplace.

The department store operator stated in a news release that the new outlook range allows for flexibility in addressing the ongoing uncertainty in the discretionary consumer market.

In an interview with CNBC, Tony Spring, CEO of Macy's, stated that customers are not spending as freely on all of the company's brands, including Bloomingdale's, a high-end department store.

"He stated that there is a noticeable softness, care, and delay in the conversion of purchasing. People are responding to the things they want, the things that are priced sharply, and the newness, but even affluent consumers are not spending as much as they did a year ago."

According to a survey of analysts by LSEG, Macy's reported fiscal second quarter results that differed from Wall Street's expectations.

• Earnings per share: 53 cents adjusted vs. 30 cents expected
• Revenue: $4.94 billion vs. $5.12 billion expected

Shares fell about 8% in premarket trading.

The iconic department store is taking steps to regain stability and achieve sustained growth. In February, Spring announced that it would close approximately 150 of its stores and invest in the remaining 350 locations. The closures are expected to occur by early 2027.

Macy's is expanding its presence by opening new, smaller stores in suburban strip malls and introducing new locations for its top-performing brands, Bloomingdale's and Bluemercury.

In the recent quarter, Macy's faced challenges in achieving a comeback as consumers have become more selective in their purchases, particularly for non-essential items.

Net sales fell from $5.13 billion in the year-ago period.

Despite being the namesake of the company, Macy's brand remained the weakest performer, with a 3.6% decline in comparable sales on an owned-plus-licensed basis, including the third-party marketplace.

At Bloomingdale's, sales decreased by 1.4% on an owned-plus-licensed basis, including the third-party marketplace. Meanwhile, Bluemercury experienced a 2% increase in comparable sales, marking the 14th consecutive quarter of growth for the beauty brand.

In the three months that ended Aug. 3, Macy's earned $150 million, or 53 cents per share, compared to a loss of $22 million, or 8 cents per share, in the previous year.

Since the turnaround plan was unveiled in February, Macy's has made progress, with comparable sales up 1% at the first 50 stores to receive additional investment. This marks the second consecutive quarter of positive comparable sales at those stores since the plan began.

Despite excluding weaker stores, Macy's sales were still lackluster, with a 3.3% decline in comparable sales for its go-forward namesake brand, including online sales.

Macy's leaders had also faced a bid by an activist group to take the company private, in addition to a choppy sales environment. Last month, Macy's announced that its board had unanimously decided to end negotiations with Arkhouse Management and Brigade Capital.

On Tuesday, Macy's shares closed at $17.74, resulting in a market cap of $4.9 billion. Despite this, the company's stock has decreased by approximately 12% so far this year, which is less than the 17% increase of the S&P 500 during the same period.

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