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Macy’s and Kohl’s reported top-line declines for the second quarter as consumers continue to pull back on discretionary spending, but the beauty category continues to be a bright spot for both.
While Macy’s CEO Jeff Gennette said results were “better than expected,” the retailer’s total net sales and sales at its brick-and-mortar locations dipped 8% YoY, while digital sales slipped 10%. The company was able to clear out overstocked spring inventory, reducing inventory 10% YoY, and is prepping for fall and holiday shopping.
- On Tuesday, the company announced plans to open more smaller stores in strip malls, with new locations in Las Vegas, Boston, and Chicago to come this year.
Beauty—specifically fragrance and prestige cosmetics—performed well across Macy’s and its subsidiaries, Bloomingdales and Bluemercury, while women’s career sportswear and men’s tailored clothing also did well at Macy’s stores. Gennette emphasized the company’s partnerships with Nike, Under Armour, and Hoka as growth drivers across its stores and online.
Lower-than-expected credit card revenue, which plummeted 36% YoY, also impacted sales, “an indication of some of the pressures that we’re actually seeing on the consumer,” CFO Adrian Mitchell said.
Kohl’s also said it saw dropping credit card payment levels, though they remain above 2019 levels, CFO Jill Timm said.
Net sales for Kohl’s were down 4.8% YoY in Q2, but the retailer beat profit expectations as it cut inventory—an area where the company got “out of control” last year—by 14%, and also had fewer promotions. The retailer’s total beauty sales grew 90% YoY in Q2 through its Sephora at Kohl’s shop-in-shops. It opened around 200 full-size shops in the quarter, and plans to open 50 more this month, along with 45 smaller-format locations in October.
“We feel good about our performance, given the persistent macroeconomic pressures on our customers and that many of our strategic efforts are just underway,” Kohl’s CEO Tom Kingsbury said.
Looking ahead…Kohl’s reaffirmed its projection of a 2% to 4% net sales decline for the year. After cutting its full-year outlook in June, Macy’s upheld its forecast of full-year sales of $22.8 billion to $23.2 billion.