Macy’s Earnings Drop 40% on Sluggish Sales

The retailer's "old-fashioned brands are not what millenials want," one analyst says as its same-store sales fall 6.1% in the first quarter.
Katie Kuehner-HebertMay 11, 2016

Sluggish sales amid weaker consumer spending dragged down Macy’s earnings for the first quarter.

The retailer reported Wednesday that sales at stores open for at least a year fell 6.1%. It was the fifth consecutive quarter the metric has declined and Macy’s worst quarterly performance since 2009.

Analysts polled by FactSet had predicted a 3.5% decline.

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“We are seeing continued weakness in consumer spending levels for apparel and related categories,” Macy’s CEO Terry J. Lundgren said in a news release. “In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook.”

Macy’s net income fell 40%, to $116 million, or 37 cents a share. Excluding non-cash settlement charges of $13 million related to the company’s retirement plans, per-share earnings were 40 cents.

Revenue fell 7.4% to $5.77 billion. Analysts had projected 36 cents in adjusted earnings per share and $5.93 billion in revenue, according to Thomson Reuters.

In trading Wednesday, Macy’s stock fell nearly 15%, closing at $31.49.

The company has been shuttering stores and expanding its new Backstage line of off-price stores but as The Wall Street Journal reports, “the moves haven’t been enough to offset weak demand and pricing for the apparel and other items at the core of its stores.”

“Clearly, our industry is in something of a rough patch,” CFO Karen Hoguet said. “We know we are not alone.”

The WSJ noted that discount chains like T.J. Maxx and fast-fashion retailers such as H&M Hennes & Mauritz AB are selling jeans as cheap as $17 and polo shirts for $10, “stealing foot traffic and hurting demand for the $50 jeans and $80 polo shirts that Macy’s sells.”

Macy’s also lowered its guidance for the year, projecting $3.15 to $3.40 in adjusted earnings per share and a same-store sales decline of roughly 4%. Earlier, the company had forecast $3.80 to $3.90 in per-share profit.