Macy’s Holiday Results as Expected Despite Impact From Slowing Consumer Spending; Shares Attractive

Macy’s announced that its fourth-quarter net sales are expected to be at the low end to midpoint of its previously issued range of $8.161 billion-$8.401 billion, roughly in line with our $8.257 billion forecast. Further, the firm reiterated its EPS guidance range for the quarter of $1.47-$1.67 (we are at $1.56), implicitly holding its expected gross margin on net sales at around our forecast of 34%. Macy's indicated that sales were strong around Thanksgiving and just before Christmas but were slower in other parts of November and December, suggesting healthy gift buying but cutbacks on self-purchases. Moreover, based on macroeconomic data and its own credit card usage information, the firm projected subpar consumer spending in 2023, especially in the first half of the year. On the brighter side, Macy's disclosed that it expects its year-end 2022 inventory to be marginally lower than at year-end 2021 and down about 15% from 2019's level, better than we had expected and putting the firm in its best post-holiday inventory position in many years. The firm is expected to report its full results in late February.