Department store chain Macy’s (NYSE:M) reported Q4 FY2023 results exceeding Wall Street analysts' expectations, with revenue down 1.8% year on year to $8.38 billion. On the other hand, the company's full-year revenue guidance of $22.55 billion at the midpoint came in 1% below analysts' estimates. It made a non-GAAP profit of $2.45 per share, improving from its profit of $1.88 per share in the same quarter last year.

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“I am grateful to all our teams for their continued commitment to our customers during the holiday season. Throughout the fourth quarter, we delivered an improved omnichannel experience, with effective merchandising and a clear demonstration of value that resulted in a strong close to the year,” said Tony Spring, chief executive officer of Macy’s,

With a storied history that began with its 1858 founding, Macy’s (NYSE:M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Department Store

Department stores emerged in the 19th century to provide customers with a wide variety of merchandise under one roof, offering a convenient and luxurious shopping experience. They played an important role in the history of American retail and urbanization, and prior to department stores, retailers tended to sell narrow specialty and niche items. But what was once new is now old, and department stores are somewhat considered a relic of the past. They are being attacked from multiple angles–stagnant foot traffic at malls where they’ve served as anchors; more nimble off-price and fast-fashion retailers; and e-commerce-first competitors not burdened by large physical footprints.

Sales Growth

Macy's is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.

As you can see below, the company's revenue has declined over the last four years, dropping 1.5% annually as its store count and sales at existing, established stores have both shrunk.

This quarter, Macy's revenue fell 1.8% year on year to $8.38 billion but beat Wall Street's estimates by 3.5%. Looking ahead, Wall Street expects revenue to decline 5.6% over the next 12 months, a deceleration from this quarter.

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Same-Store Sales

Macy's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 3% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.

In the latest quarter, Macy's same-store sales fell 5.4% year on year. This decrease was a further deceleration from the 3.3% year-on-year decline it posted 12 months ago. We hope the business can get back on track.

Key Takeaways from Macy's Q4 Results

We like that revenue and gross margin outperformed Wall Street's estimates. On the other hand, its full-year earnings forecast missed analysts' expectations and its full-year revenue guidance slightly missed Wall Street's estimates. Overall, we think this was a fine quarter, with the outlook dragging down shares. The stock is down 1.5% after reporting, trading at $19.03 per share.

So should you invest in Macy's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.