Exchange: LSE | Sector: Consumer Cyclical | Industry: Department Stores
Q2 2024
Published: Jul 31, 2024
Earnings Highlights
Revenue of $5.10B down 39.2% year-over-year
EPS of $0.53 increased by 307.7% from previous year
Gross margin of 42.3%
Net income of 150.00M
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Macy's Inc (0JXD.L) QQ2 2024 Results Analysis — Revenue Decline in a Challenging Consumer Backdrop with Margin Resilience and Balance Sheet Support
Executive Summary
Macy's delivered a Q2 2024 reporting period (QQ2 2024) with a pronounced revenue contraction against a softer macro consumer environment. Revenue reached $5.10 billion, down roughly 39% year-over-year, while gross profit was $2.158 billion and the gross margin stood at 42.3%. Despite a steep top-line decline, operating income expanded to $185 million and net income to $150 million, with diluted earnings per share of $0.53-$0.54. The strength in profitability metrics relative to the revenue drop reflects aggressive cost discipline and a favorable operating expense structure, though gross margin pressure persisted versus historical levels. The quarter generated modest operating cash flow of $8 million and negative free cash flow of approximately $195 million, driven by substantial capital expenditures (capex ~ $203 million) and working capital dynamics. The balance sheet remains solid in aggregate, with total assets of about $15.83 billion and net debt of roughly $5.37 billion, liquidity metrics showing a current ratio of ~1.48 and a cash position of $646 million at quarter-end. Management commentary is not present in the supplied transcript data; as a result, the investment thesis hinges on the reported numbers and implied trajectories from cost controls, inventory management, and omnichannel execution, balanced against ongoing revenue headwinds. Investors should monitor beat/raise signals from any forthcoming guidance, inventory turns, and capex intensity, alongside competitive dynamics in the department-store space.
- Revenue: $5.096 billion in QQ2 2024, YoY change: -39.15%, QoQ change: 0.00%.
- Gross Profit: $2.158 billion; Gross Margin: 42.35%; YoY gross profit change: -34.59%; Margin compression versus prior year.
- Operating Income: $185 million; Operating Margin: 3.63%; YoY operating income change: +412.68%; QoQ change: +20.00%.
- Net Income: $150 million; Net Margin: 2.94%; YoY net income change: +314.29%; QoQ change: 0.00%.
- EPS (Diluted): $0.53; EPS (GAAP): $0.54; YoY EPS change: +307.69%; QoQ change: 0.00%.
- EBITDA: ~$398–439 million (range across filings); EBITDA Margin: ~8.0–8.6% for the quarter.
- Operating Cash Flow: $8 million; Capex: $203 million; Free Cash Flow: -$195 million; FCF Margin: negative due to capex and working-capital effects.
- Balance Sheet (selected): Total assets ~$15.83B; Total liabilities ~$11.53B; Total stockholders’ equity ~$4.30B; Cash and cash equivalents ~$646M; Total debt ~$6.01B; Net debt ~$5.37B.
- Liquidity: Current ratio ~1.48; Quick ratio ~0.34; Cash ratio ~0.17.
- Leverage and profitability indicators: Debt-to-capitalization ~0.58; Debt-to-equity ~1.40; ROA ~0.95%; ROE ~3.49%; Asset turnover ~0.32; Inventory turnover ~0.67; Receivables turnover ~14.35; DIO ~134 days; DSO ~6.3 days; CCC ~140 days.
- Valuation snapshots: Price-to-earnings ~8.0x; Price-to-book ~1.12x; Price-to-sales ~0.94x; EV/EBITDA ~23.2x; Dividend yield ~1.0%; Free cash flow yield negative; P/FCF very negative due to negative FCF.
- Key takeaway: The quarter reflects a challenging revenue backdrop but with improving cost structure and margin resilience. The big question remains: can Macy’s translate cost discipline and omnichannel momentum into sustainable top-line growth in a soft consumer environment, while managing capital allocation (capex, working capital) to drive free cash flow over time?
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.10B
-39.15%
0.00%
Gross Profit
2.16B
-34.59%
0.00%
Operating Income
185.00M
412.68%
20.00%
Net Income
150.00M
314.29%
0.00%
EPS
0.54
307.69%
0.00%
Key Financial Ratios
currentRatio
1.48
grossProfitMargin
42.3%
operatingProfitMargin
3.63%
netProfitMargin
2.94%
returnOnAssets
0.95%
returnOnEquity
3.49%
debtEquityRatio
1.4
operatingCashFlowPerShare
$0.03
freeCashFlowPerShare
$-0.7
dividendPayoutRatio
32%
priceToBookRatio
1.12
priceEarningsRatio
8.01
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data were provided for QQ2 2024. As a result, management quotes or thematic takeaways from a conference call are not available in the supplied dataset.
N/A
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Forward Guidance
No formal forward guidance is included in the provided data. Given the macro consumer backdrop, sensitivity to discretionary spend, and ongoing capital expenditure, the near-term path likely hinges on: (1) inventory optimization and margin preservation, (2) continued investment in omnichannel capabilities and associate productivity, (3) driving higher-margin categories and private-label opportunities, and (4) maintaining prudent capital allocation to minimize negative free cash flow. Investors should monitor any subsequent guidance on expected revenue trajectory, gross margin expansion opportunities, operating expense containment, and capital expenditure plans for the balance of FY2024 and into FY2025.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JXD.L Focus
42.35%
3.63%
3.49%
8.01%
0EV1.L
50.50%
9.70%
1.35%
53.71%
0UC3.L
38.70%
14.40%
23.60%
12.60%
0QYE.L
37.20%
0.59%
1.22%
308.34%
0KAK.L
36.20%
23.40%
3.60%
13.07%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ2 2024 results depict a company navigating a weak revenue environment while delivering margin-resilient profitability and maintaining EBITDA, albeit with negative free cash flow due to capex and working-capital dynamics. The stock appears reasonably priced on an earnings basis (P/E around 8x) relative to broader markets, but valuation is tempered by a sizable debt load and negative FCF, which elevates sensitivity to any sustained deterioration in cash flows. The key to a constructive longer-term outlook is successful execution of omnichannel growth, inventory discipline, and capital allocation that supports deleveraging and optionality around store optimization. In scenarios where consumer demand stabilizes and margins can be stabilized or expanded through mix shift and cost discipline, there is potential for multiple expansion and improved free cash flow generation. Monitoring points for investors include the pace of inventory turnover, the trajectory of working capital, capex cadence, any announced guidance, and competitive responses in the department-store space.
Key Investment Factors
Growth Potential
- Omnichannel and loyalty-program advancements could improve conversion and average basket size, supporting higher-margin sales.
- Private-label and exclusive-brand strategies may improve gross margins if execution scales with demand.
- Real estate optimization and store-network efficiency could reduce occupancy costs and unlock ancillary value.
Profitability Risk
- Material revenue decline amid weaker consumer spending could pressure top-line growth for an extended period.
- Margin pressure from discounting, promotions, and cost-of-goods inflation may persist.
- High absolute debt load and negative free cash flow raise financing and liquidity considerations, especially in a higher-rate environment.
Financial Position
- Liquidity is adequate but constrained: cash ~$646M against total debt ~$6.01B; net debt ~$5.37B.
- Current ratio ~1.48 and quick ratio ~0.34 indicate modest near-term liquidity risk if cash flows deteriorate.
- Asset-light, omnichannel-oriented strategy plus steady EBITDA generation provides a base for deleveraging and potential deleveraging improvements over time.
SWOT Analysis
Strengths
Strong brand presence in the department-store segment with a broad omnichannel footprint.
EBITDA generation and positive operating income in a challenging top-line environment.
Diversified merchandising mix including apparel, cosmetics, and home goods; established loyalty/CRM capabilities.
Solid asset base and brand equity support resale/repositioning opportunities.
Weaknesses
Significant revenue decline YoY, indicating sensitivity to macro consumer softness.
Gross margin erosion and ongoing promotions pressure relative to historical levels.
Negative free cash flow driven by capex intensity and working-capital dynamics; leverage remains elevated.
Opportunities
Further margin uplift through inventory optimization and category mix improvements.
Expansion of e-commerce, omnichannel fulfillment, and in-store pickup to boost conversion and average ticket.
Real estate optimization and possible monetization or better utilization of underperforming spaces.
Threats
Macro-economic headwinds and consumer confidence risk in discretionary categories.
Competitive intensity from online and discount retailers; promotional environment could compress margins further.
Interest rate volatility and potential refinancing risk given the debt burden.