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Macy’s holiday sales disappoint; slashes sales and profit outlook

The nation’s largest department store retailer reduced its outlook for the current fiscal year on the heels of weak holiday sales.

Macy’s same-store sales inched up 0.7% during November and December, compared with 1.0% growth in the year-ago period. The department store retailer cut its outlook for same-store sales in the current fiscal year to 2%, down from a previous forecast of 2.3% to 2.5%. Macy’s said it now anticipates flat growth in net sales for the current fiscal year, down from its earlier guidance of an increase between 0.3% and 0.7%. It also reduced adjusted earnings-per-share projection to $3.95 to $4.00 from $4.10 to $4.30, compared with the analysts’ estimates of $4.23.

"The holiday season began strong - particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas," said Macy’s CEO Jeff Gennette.

According to analyst Neil Saunders, managing director of GlobalData Retail, one of Macy’s biggest problems during the holiday period was its stores.

“While a handful of refurbished locations looked good, the majority of the estate was incredibly lackluster,” he said. “Some stores had virtually no holiday cheer and were crammed full of dull merchandise. This unpleasant and uninspiring shopping environment meant Macy's was not able to capitalize on strong footfall to malls and cities.”

In the holiday period, Macy’s said it saw strong performance across fine jewelry, women’s shoes, fragrance, dresses, outerwear, active and home. But its sales growth was largely offset by: underperformance of women’s sportswear, seasonal sleepwear, fashion jewelry, fashion watches and cosmetics. The retailer also said that temporary fulfillment challenges following the fire in its West Virginia distribution center, and underestimation of the impact of changes to its pre-Christmas earn & redeem promotional event contributed to its performance.

Gennette noted that chain will take “the necessary steps in January to ensure a clean inventory position as we enter fiscal 2019.”

“Looking back at 2018, we met our goal of returning the company to growth, he said. “Our revised guidance is above the expectations we set at the start of the fiscal year, and we expect to deliver our fifth consecutive quarter of positive comparable sales.”
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