Macy’s Q2 Earnings Report: How Will The Retailer Revitalize Its Business?

Macy’s (M) posted its second-quarter earnings on Wednesday, seeing its stock shares reach a 52-week low and causing it to revise its guidance for the rest of 2019. In its earnings report, Macy’s downgraded its diluted EPS as it was faced with a number of markdowns on spring inventories at its stores.

“Macy’s, Inc. delivered another quarter of comparable sales growth,” Jeff Gennette, Macy’s chairman and CEO said in a statement. “That said, we had a slow start to the quarter and finished below our expectations.

“Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism. We took markdowns to clear the excess Spring inventory and are entering the Fall season with the right inventory to meet anticipated customer demand,” he added.

The company saw its asset sale gains for Q2 reach $7 million pre-tax compared to $46 million pre-tax in 2018’s second-quarter. Its combined Q1 and Q2 asset sales gain totaled $49 million pre-tax versus $53 million pre-tax in the first half of 2018.

Based on its second-quarter earnings report, Macy’s said it was revising its guidance for its diluted EPS by 20 cents. The lower adjusted diluted EPS, however, does not reflect tariffs on Chinese goods, which the company said it was “actively working with its vendor partners and suppliers in China to help mitigate potential impact.”

“Our 2019 strategic initiatives are on track to contribute to sales growth in the back half of the year, and we have plans to drive productivity and improve gross margins,” Gennette added. “Our team has responded quickly to the external environment, course corrected when needed and we remain confident.”

To help boost its sales, Macy’s said it was getting into the clothing subscription and apparel resale businesses, CNBC reported. The company partnered with ThredUp at 40 of its stores as part of a pilot program to target millennials and Gen Z consumers, according to the news outlet.

“We know many consumers are passionate about sustainable fashion and shopping resale,” Gennette said on the earnings call with analysts on Wednesday. “This partnership gives us the opportunity to reach a new customer and keep them coming back to shop an ever-changing selection of styles, and brands, that we don’t typically carry.”

The retailer has also teamed up with CaaStle under its Bloomdale’s brand to offer a subscription clothing service, according to CNBC.

Macy’s will release its third-quarter 2019 results on Nov. 21.

Shares of Macy's stock were down 15.75 percent as of 11:18 a.m. ET on Wednesday.