Macy’s Q4 earnings slump, but still beat analysts expectations

Store closures, layoffs and shifting consumer preferences weighed down Macy’s bottom line, negatively impacting its fourth quarter earnings. And the retailer doesn’t see its slump ending in the near future.



Macy's net income fell to $475 million in the quarter ended Jan. 28, compared with $544 million in the year-ago period. Adjusted earnings per share came to $2.02, better than analysts had expected. Analysts had expected $1.95 per share for the quarter, according to FactSet.



Macy’s sales fell 4.0% to $8.51 billion for the quarter, less than expected. Same-store sales on an owned plus licensed basis for the fourth quarter were down 2.1%, beating analysts predicted 2.2% drop.



Sales in fiscal 2016 totaled $25.8 billion, down 4.8% from $27.1 billion last year. Comparable sales on an owned plus licensed basis for fiscal 2016 declined by 2.9%.



For the current year, Macy’s total sales are projected to decline 3.2% or 4.3%, reflecting the closure of 66 stores last year. Same-store sales are expected to fall 2% to 3%.



“While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” said Terry Lundgren, Macy’s chairman and CEO who will step down March 23 as chief executive and be succeeded by president Jeff Gennette. “These include continued improvement in our digital platforms, the rollout of our new approach to fine jewelry and women’s shoes, an increase in exclusive merchandise and the refinement of our clearance and off-price strategy. We also took a big step forward in rightsizing our physical footprint and restructuring our entire organization. The combination of these initiatives will help us gain market share, return to growth and drive enhanced value for our shareholders over time.”



As the company evaluates how to invest for the future in 2017, it will continue looking at the challenges in the retail environment and changing consumer shopping behaviors.



“We know we must evolve our strategy and execute faster,” Lundgren said. “Key to this is enhancing the customer experience in our stores where we are developing and testing concepts that feature new merchandise and entertainment options alongside enhanced technology to make shopping simpler.



Additional initiatives that Macy’s said will improve sales trends in 2017 include continued omnichannel improvements, an updated marketing strategy and a simplified pricing structure.



The company is also focused on the execution of its real estate strategy.



“Overall, real estate transactions in fiscal 2016 generated cash proceeds of approximately $675 million, which is helping to fund continued reinvestment in the business,” Lundgren said.



Macy’s also plans on advancing its Brookfield partnership and “continuing to monetize locations that have closed or are plan to close,” Lundgren added. “We are also developing strategies that will help create value for Herald Square while making the store an even more vibrant retail experience.”