Macy's earnings top forecasts amid heavy discounts into key holiday season

Updated at 8:31 am EDT

Macy's  (M) - Get Free Report shares moved lower in pre-market trading after the retailer posted better-than-expected second quarter earnings, and reiterated its full-year profit forecast, following heavy discounts need to shed excess inventory over the summer months. 

Macy's said adjusted earnings for the three months ending on July 29, the group's fiscal first quarter, came in at 26 cents share, down 74% from the same period 13 cents per share. Group net sales, Macy's said fell 8.4% to $5.13 billion, topping analysts' estimates of a $5.09 billion tally, while same-store sales were down 8.2%.

Heavy discounting on spring and winter items, as well as what it described as '"weakened demand trends" heading into the summer months, are the likely forces behind Macy's profit drop, although same store sales were also forecast to fall 6.5% from last year's levels.

“Our teams surgically implemented clearance markdowns and promotions to effectively clear spring seasonal receipts and ensure fresh assortments for the fall and Holiday seasons," said CEO Jeff Gennette.

“We continue to see uncertainty in the macroeconomic environment," he added. "We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand.” 

Earlier this spring, Macy's slashed its full-year profit forecast as it "moved quickly to take the appropriate actions to meet current consumer demand and manage our expenses" to reflect "incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year."

The retailer reiterated that it sees full year net sales in the region of $22.8 billion to $23.2 billion, down from a prior forecast of $23.7 billion to $24.2 billion. Adjusted earnings, the group said, will likely come between $2.70 to $3.20 per share.

Macy's shares were marked 2.9% lower in pre-market trading to indicate an opening bell price of $14.30 each, a move that would leave the stock down more than 27% for the year. 

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