Macy’s stock fell more than 5% on Wednesday after the retailer released second-quarter earnings that its CEO described as “disappointing.”
Macy’s recorded $6.1 billion in second-quarter revenue, down 2.6% year-over-year and below the $6.2 billion Wall Street consensus. Net income for the quarter declined 25.7% to $217 million, or 64 cents per share, compared to analysts’ 75 cent per-share analyst consensus.
“We’re going to face the music when we have good quarters [or] bad quarters. And this was a tough one,” CEO Terry Lundgren told CNBC.
The company said its second-quarter results reflected, among other things, bad winter weather, weak tourist spending and a labor dispute at West Coast ports that caused delays in getting merchandise to stores.
Comparable store sales for the quarter fell 1.5% on an owned and licensed basis; on a purely owned basis, same-store sales dropped 2.1% during the quarter. Macy’s also on Wednesday cut its outlook on total sales for 2015, forecasting an approximate 1% decline, compared to previous guidance for growth of about 1%.
“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 said.
CFO Karen Hoguet told investors on a conference call that some of Macy’s struggles this quarter came from the way consumers are choosing to spend their money.
“We are seeing customers gravitate to restaurants, recreational services, health care and electronics,” she explained, rather than spend on apparel, home goods and other items that are core to Macy’s business.
For future growth, Macy’s is looking to China, announcing that it is forming a joint venture with Fung Retailing to create an e-commerce store for Chinese consumers on Alibaba’s popular Tmall Global shopping site.
“Millions of Chinese have come to know and love Macy’s when they live in the United States or travel to New York, San Francisco, Chicago and other American destinations,” Lundgren said in a news release.