Macy’s said that its first-quarter forecast will not be as bad as expected as embattled retailers across the US attempt to bring their businesses out of lockdown.
The US department store chain expects an operating loss of “only” $969m between February and May, it said in a release on Tuesday, compared to a previous operating loss forecast of $£1.1bn. It currently has around 450 of its stores open out of an estate of 775.
The group reported $3.02bn in sales for its first fiscal quarter ended on 2 May, down 45% from the previous year when it sold $5.5bn, but slightly up from the $3.04bn analysts had forecasted for the quarter.
The New York-based retailer also reported a net loss of $652m, which is $788m less than the $136m it earned the year before. Losses per share, came in at $2.03 per share, slightly lower than the consensus estimate of $2.18 per share.
Macy’s chief executive Jeffrey Gennette (pictured) said: “Our strong digital business sales trend continued throughout May, and it is encouraging to see that as we reopen a store, the digital business in that geography continues to be strong. By June 1, we had approximately 450 stores reopened, with the majority opened in their full format. Our reopened stores are performing better than anticipated”.
The company also showed stronger liquidity for the quarter compared to the previous year, showing a total of $1.5bn in cash and equivalents and a $500m reduction in inventory, reflecting positive efforts from the battered retailer to reduce expenditures amid the pandemic.
Its statement is a sharp contrast from early March, when the coronavirus forced the retailer to temporarily close all of its stores in the US and furlough a majority of its 125,000 employees.
Macy’s (M) shares are soaring in pre-market stock trading activity as a result of this positive report, trading at around $10.3 per share and posting an 8% jump ahead of the opening bell. However, Macy’s stock is still down 41.5% so far this year, as concerns about the company’s survival persist.
This preliminary earnings report follows yesterday’s announcement of a $4.5bn debt inflow consisting of $1.3bn in the form of a corporate bond with an interest rate of 8.375% and $3.15bn from an asset-backed business loan.
The company said it intends to use these funds to repay an existing $1.5bn unsecured credit agreement and to cover for general corporate expenses.
Macy’s debt for the quarter went up by 19%, jumping from $4.7bn to $5.6bn by the end of the first quarter of 2020, even though this figure does not incorporate the effect of this recent $4.5 billion debt issue.