Macy’s Q3 profit misses, but retailer sees improving trends

Macy’s third quarter profit fell short of analysts’ expectations, but the retailer raised its annual sales outlook based on improving trends in its business.



The retailer also announced an agreement with Brookfield Asset Management to monetize the value of its massive real estate portfolio.



“The trends we saw in the third quarter give us confidence that we can deliver our expectations for the fourth quarter and our guidance for fiscal 2016,” said Terry J. Lundgren, Macy’s chairman and CEO.



“Our third quarter top line results were better than the first half of the year and our sales-driving initiatives continue to gain traction.”



The retailer said a strengthening trend across its apparel businesses, coupled with new initiatives like tech watches from Apple, Michael Kors and others, are a good indicators for an improved performance in the fourth quarter.



“Our customers tell us we are their holiday shopping destination, and we are excited about our gift assortments, marketing strategies and digital enhancements, all of which should set us up for a stronger finish to the year and position us well for an improved performance in 2017 and beyond,” Lundgren said.



Macy's reported earnings of $17 million, or 5 cents per share, for the quarter ended Oct. 29, compared with $118 million, or 36 cents per share, in the year-ago period. The big drop mainly due to a pension-related charge.



The results fell short of Wall Street expectation



Sales in the third quarter fell 4.2% to $5.63 billion, in line with expectations.



Same-store sales were an owned plus licensed basis were down 2.7%, not as bad as expected. Macy’s attributed the difference between the year-over-year change in total and comparable sales largely resulted from the closing of 41 underperforming Macy’s stores at the end of fiscal 2015.



In the third quarter, the company opened a new Macy’s store in Kapolei, Hawaii, a Macy’s Backstage store in San Antonio, Texas, and seven Bluemercury freestanding specialty stores.



Earlier this month, the company opened a Bloomingdale’s Outlet in Orange County, Calif.



“As we have said, a setback is a setup for a comeback and that is why we continue to look with confidence at the close of 2016 and our longer-term outlook,” Lundgren said. “We are reallocating and prioritizing our spending to drive growth, improve the customer experience, increase our agility and deliver strong financial results. We also are making good progress on our strategies to create shareholder value through our real estate, while preserving our ability to operate as a top retailer with a healthy balance sheet.”