Why Macy's is looking forward to the holidays

Macy’s may be counting on key growth initiatives to generate sales during the holidays after reporting another disappointing quarter of financial results.

The company says same store sales declined 2.1% in the second quarter ended Aug. 1. Profit fell to $217 million, or 64 cents a share, from $292 million, or 80 cents a share, a year earlier. Total sales fell 2.6% to $6.1 billion, missing analysts’ estimates for $6.23 billion. Gross margin narrowed to 40.9% from 41.4% a year earlier.

“We are disappointed in our second quarter results, which were impacted by a variety of factors, both internal to the company and in the macroeconomic environment. We expect an improvement in trend beginning in the second half of 2015 based on a range of promising new strategic initiatives, including those initially announced in January, which we believe will transform our company in the years ahead,” said Terry J. Lundgren, Macy’s chairman and chief executive officer. “In the second quarter, we removed a major Friends & Family promotional event from Macy’s calendar. In addition, as a result of the previous port slowdown, planned markdowns in many departments were delayed into the second quarter to clear merchandise that arrived late. Moreover, throughout the first half of the year, overall consumer demand has been restrained in many of the categories of merchandise we sell, and the strong U.S. dollar has led to significantly lower international tourist spending.”

Lundgren spoke to CNBCWednesday about the implications of Macy's results and real estate plans.

The company says, however, that it continues to aggressively position itself for sales growth in the short and long term.Examples include:

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  Accelerating progress in the company’s fast-growing online business through integrated omnichannel buying and planning of merchandise, as well as more strategic placement of inventories in stores and online fulfillment centers. Expanded markets for Same Day Delivery, as previously announced, and nationwide Buy Online Pick Up In Store provide Macy’s and Bloomingdale’s customers more options than ever.


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  Piloting the first six Macy’s Backstage off-price stores in metro New York City, as previously announced, beginning in September. All are expected to be in full operation for the holiday season. Additional Backstage store locations are expected to be rolled out beginning in 2016, based on learnings and customer response to the pilots.


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  Beginning e-commerce selling in China in late fall 2015 through a joint venture with Fung Retailing Limited (for details, see a separate news release issued today).


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  Opening another 10 Bluemercury free-standing specialty beauty and spa locations before the end of 2015, bringing its store count to 76. In addition, Bluemercury is using Macy’s, Inc.’s omnichannel and digital expertise to improve its e-commerce offering and drive online sales, and four Bluemercury stores within Macy’s locations will be opened this fall.

“Our work to enhance the performance of our business through organic growth and new businesses is multi-dimensional and rooted in the extraordinarily talented management team at Macy’s, Inc. We remain committed to enhancing value for our shareholders as we strengthen our position as a world-class omnichannel retailer with a capability to serve consumers in new ways,” Lundgren added.

Macy’s also announced it will sell property in downtown Brooklyn to Tishman Speyer (see separate news release) to take advantage of the inherent real estate value in this prime location while making the Macy’s store more productive and easier for customers to navigate. This transaction will enable Macy’s to re-create its Fulton Street store while further enlivening one of New York City’s most dynamic neighborhoods.

The company is reducing its full-year 2015 guidance for same store sales to be approximately flat, compared with previous guidance for growth of approximately 2%. The company is maintaining its guidance for 2015 earnings per diluted share to be in the range of $4.70 to $4.80 as a result of the expected $250 million gain on the sale of real estate in downtown Brooklyn, which was not factored into previous calculations.

The company operates about 885 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy’s, Bloomingdale’s, Bloomingdale’s Outlet and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com websites.