Rough going for Macy’s
Macy’s on Wednesday reported its fifth consecutive decline in same-store sales, and announced plans to improve its performance, from new product launches to more off-price shops.
The nation’s largest department retailer also reduced its sales and earnings guidance for the year. Similar to many retailers, Macy’s is challenged by an overall retail environment marked by sluggish traffic, increased competition and cautious consumers.
Macy’s revenue fell 7.4% to $5.77 billion in the quarter ended April 30, compared to analysts’ projections for $5.93 billion. Same-store sales declined 6.1%
The company reported a profit of $116 million, or 37 cents a share, down from $193 million in the year ago period. Excluding charges related to the company’s retirement plans, per-share earnings were 40 cents.
“We are seeing continued weakness in consumer spending levels for apparel and related categories,” said Macy’s chairman and CEO Terry Lundgren. “In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook.”
Citing “headwinds,” Lundgren noted that the company was dealing with double-digit declines in tourist spending in key markets for both its Macy’s and Bloomingdale’s stores.
“Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term,” Lundgren said. “We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value.”
To improve its business trend, Macy’s will continue with the rollout of in-store pilots of its off-price format Macy’s Backstage (six store-in-stores already open, with nine additional by the fourth quarter), and also continue to expand its Bluemercury format (five in-store shops already open; a total of 22 expected to be in place by the fourth quarter).
Macy’s also is rolling out its upgraded jewelry department concept, successfully piloted in 40 stores in fall 2015, to more than 350 stores by year-end 2016.
On the merchandise front, Macy’s cited such upcoming product launches as its new Elton John and Lady Gaga-supported Love Bravery clothing and accessory collection and a holiday partnership with Brookstone.
Even as it looks for additional opportunities to moderate spending across the company, Macy’s said it is investing in front-line service, including more full-time store associates and enhanced online customer support, and technology, including increased digital and mobile shopping functionality, at Macy’s and Bloomingdale’s.
Macy’s is still looking at opportunities to unlock value from its real estate assets. The company said it is evaluating proposals from potential partners regarding its flagship locations and mall-based stores.
Macy's cut its full year same-store sales guidance to a decline in a range of 3% to 4%, from a previous estimate for a 1% drop. For the year, Macy's now sees earnings of $3.15 to $3.40 a share, down from an earlier estimate of $3.80 to $3.90 per share.