Macy's to report Q2 earnings as it doubles down on new strategy, ends buyout deal discussions

Macy's ( M ) will be watched closely as it reports its first earnings after turning down a $6.9 billion buyout offer.

On Wednesday, Wall Street expects the department store chain to report $5.06 billion in revenue, a 1.4% year-over-year decline. Same-store sales are expected to be down 0.49%, while adjusted earnings per share are estimated to drop from $0.29 to $0.26.

The company ended conversations for a potential buyout bid from one of its shareholders, Arkhouse, and its partner Brigade Capital Management on July 15. The offer first became publicly known early last December.

In a release, Macy's said "continuing diligence is not warranted or in the best interests of shareholders."

Its reasoning included uncertainty around financing of the deal, a "less than compelling value proposed" ($24.80 per share), and the negotiation being a "significant distraction for the management team." The offer represented a roughly 60% premium over Macy's share price on Nov. 30, 2023.

Instead, Macy's is doubling down on its turnaround strategy, dubbed "A Bold New Chapter." CEO Tony Spring, who took the role this February, introduced the plan in Q1.

The strategy includes closing underperforming stores, improving remaining "go forward" locations, and investing in digital sales.

Morgan Stanley analyst Alex Straton expects "higher market conviction" when "visibility" on the P&L starts to show from its turnaround plan in mid-2025, following initial store closures and investments in 50 high-performing stores.

Shares of Macy's are down 10% this year, compared to the S&P 500's ( ^GSPC ) 18% rise.

Macy's Q2 earnings come as shoppers are growing weary of higher costs and remain on the hunt for deals.

Per a report from Placer.ai, Macy's year-over-year monthly visits were down through most of 2024.

"The chain’s weekly foot traffic has remained at or above 2023 levels since the middle of the month [July] — likely spurred by back-to-school shopping and sales," Placer.ai wrote in a post.

UBS analyst Jay Sole said its "structural challenges" will "cause it to lose share to Off-Price retailers, brands, and Amazon."

Discount retailer TJX Companies, Inc. ( TJX ), the parent company of TJ Maxx, Marshall's, and Home Goods, is set to report Wednesday before market open as well.

The earnings rundown

Here's what Macy's is expected to report, compared to Q2 of last year:

As of Q1, the company expected to end 2024 with net revenue in a range of $22.3 billion to $22.9 billion. Same-store sales are expected to be between a 1% year-over-year drop to a 1.5% increase.

Citi analyst Paul Lejuez expects the company to beat Q2 expectations but does not expect it to raise guidance, adding in a note to clients "they will likely want to remain cautious given the macro backdrop."

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BrookeDiPalma