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Macy's (M -2%) heads lower today despite projecting Q3 (Oct) revenue and comparable sales ahead of consensus. Injecting some uncertainty into the stock today was that the department store chain found errors surrounding delivery expenses from an employee, prompting it to delay its Q3 earnings report by another week or two. Macy's noted that it should have its full quarterly report by December 11, including its updated FY25 (Jan) outlook.

Without knowing how Macy's sees its holiday season shaping out, investors are cautious about igniting a more meaningful rally today. However, delaying the report until after Black Friday should provide better insight into how the holiday season will shake out. Shares continue to trade in a tight range, recently bouncing nicely on Friday following moderate selling pressure due to Target's (TGT) gloomy OctQ report last week.

• For Q3, Macy's anticipates revenue of $4.74 bln, a 2.5% decline yr/yr, marking the company's tenth consecutive quarter of yr/yr sales compression. Last quarter, Macy's CEO Antony Spring mentioned that the end consumer has grown more discerning, contributing to the company's lowered FY25 sales outlook to $22.1-22.4 bln. Still, Mr. Spring hinted at improving trends, commenting in a conference two weeks later that performance was slightly stronger during the end of August and through Labor Day compared to Q2 (Jul).
• These trends seeped into Q3, not only pushing estimated sales ahead of consensus but also go-forward same-store sales growth, which slipped by -2.0% on an owned basis and -0.9% on an owned and licensed basis. The Macy's banner saw go-forward comps of -2.6% on an owned basis. However, Macy's First 50 locations, where the company is testing a new format, such as emphasizing certain brands, including Birkenstock (BIRK) and NIKE (NKE), enjoyed a +1.9% expected bump in comp growth in Q3.
  • Macy's continues to see First 50 as a leading indicator of the performance of Macy's brand. These stores have consistently outperformed Macy's other locations, boasting higher traffic and conversion, which management chalks up to a steadier flow of inventory, better staffing, and a more appealing visual presentation of products.
• Macy's other banners, including Bloomingdales and Bluemercury, partially offset the company's projected negative comp growth in Q3. Bloomingdales comps edged an estimated +1.0% higher, supported by relative strength in contemporary apparel, beauty, and digital. Meanwhile, Bluemercury, which focuses on cosmetics, registered an expected +3.3% comp, marking its 15th straight period of growth, reflecting the relative demand resilience of the banner's skincare offerings.

Today's reaction is reserved, underscoring mixed feelings surrounding Macy's Q3 guidance. Target delivered a surprisingly glum report last week while Walmart (WMT) registered upbeat OctQ numbers, highlighting significant unevenness across the retail landscape. Given this uncertainty, the market is hesitant today, potentially waiting for Macy's full report before pulling the stock noticeably in either direction.