Most Recent Articles In Financial
Latest Financial Articles
- Europe’s Stock Markets Log Uneven Performance
- Retail Stocks Sink as Dow Falls 470 Points
- China’s PMI Falls, Asian Stocks Suffer
More Articles By
NEW YORK — Macy’s sneezed Wednesday — and all of retail got the shivers.
This story first appeared in the August 15, 2013 issue of WWD. Subscribe Today.
After a long string of quarterly comp-sales gains, Macy’s Inc. took a stumble in the second quarter due to consumers tightening up, leading to weakness in juniors, jewelry, shoes, cosmetics, fragrances and watches.
Shares of the department store fell 4.5 percent to $46.33 after it reported a 0.8 percent second-quarter sales decline and earnings per share of 72 cents, significantly below the 79 cents analysts projected and the company’s first miss since 2007. Macy’s also cut its forecast for the year.
Macy’s decline helped push the S&P 500 Retailing Industry Group down 1.5 percent, or 12.72 points, to 831.91. The Dow Jones Industrial Average fell 0.7 percent, or 113.35 points, to 15,337.66.
The declines at Macy’s don’t bode well for the rest of the earnings season since the firm was expected to be a bright spot in a generally tough quarter.
Also posting stock losses for the day were Aéropostale Inc., down 3 percent to $12.76; PVH Corp., 2.5 percent to $128.58; Urban Outfitters Inc., 2.4 percent to $40.77, and The Bon-Ton Stores Inc., 2.3 percent to $15.07.
“Obviously, the performance last quarter was not what we are used to,” Terry J. Lundgren, chairman, chief executive officer and president of Macy’s, told WWD. “We are disappointed we couldn’t overcome some of the broader consumer challenges.
“What was selling is a lot of our exclusive products and unique products that aren’t in everyone’s closet. I am hoping there is going to be a big shift in terms of cold-weather products. Certainly, warm-weather products did not perform well.”
While Macy’s comp-store sales dipped, ending a run of 13 straight quarterly revenue gains, the department store did keep its streak of earnings per share gains alive — 15 quarters in a row. Macy’s EPS rose to 72 cents for the quarter ended Aug. 3, versus 67 cents a year ago.
Net income for the quarter was up 0.7 percent to $281 million, from $279 million, while total sales slipped 0.8 percent to $6.07 billion from $6.12 billion.
Macy’s cut its forecast for the year to a comps increase of 2 to 2.9 percent, versus a previous forecast of 3.5 percent. Earnings for fiscal 2013 are now expected to range between $3.80 and $3.90 a diluted share, versus the previous $3.90 to $3.95 projection. Macy’s stock closed at $46.33, down $2.17, or 4.47 percent.
The $27.7 billion, 840-unit Macy’s, which has long been among the best retail performers through the recession and recovery, was first out with reporting the second quarter. Today, Nordstrom Inc., Wal-Mart Stores Inc. and Kohl’s Corp. report second-quarter figures, and Dillard’s Inc. reported after the market closed on Wednesday.
Many retailers are expected to report weakness and a slow start to back-to-school, as shoppers feel pinched by higher taxes, the price of fuel and the slow job market rebound. “That’s absolutely not the case at Macy’s,” said Lundgren, expressing confidence that Macy’s would buck the industry b-t-s trend. “In the last couple of years, we have done OK, actually not particularly well with back-to-school.” But this season so far, Lundgren said, “young businesses in particular have been quite strong….That doesn’t always directly tie to a strong fourth quarter, but it’s certainly better to have strong young businesses,” at this point.
Lundgren and other company officials couched Macy’s second quarter as a glitch, rather than the onset of a trend, indicating sustained strength in handbags, furniture and dresses, and a pickup in kids and activewear with the onset of b-t-s. Executives also indicated that Impulse, Macy’s department for older Millennial females, is gaining traction due to the addition of new brands, and that women’s merchandise, in career, modern styles and opening price points, also performed well, reversing the negative trend in women’s for some time and fueling some optimism for fall. The two new brands are Maison Jules and QMack; each launched in about 150 stores this month, as part of Macy’s stable of Impulse brands. Macy’s Mstylelab targets customers 13 to 22 years old.
Lundgren also indicated that the second quarter was planned for a lower increase than the first quarter because a “friends and family” promotion was shifted partly into the first quarter. He said customers did respond to markdowns taken after a cool spring, and that Bloomingdale’s sales rebounded in the second quarter.
The Macy’s chief seemed optimistic about the rest of the year, noting that Macy’s accelerated receipts of fresh inventory to respond to an early start to the academic year in certain regions of the country, helping the younger fashion categories. Of the acceleration, he said, “That’s done on a very localized level.”
Lundgren described the second-quarter performance as more of a “speed bump” rather than an emerging trend. “This is not going to stop us,” Lundgren said during the interview in which he stressed that he and the rest of management do not see a change in the momentum Macy’s has accumulated over the last three years. “The focus of our company is constantly improving on what we have done in the past. There is still significant opportunity for growth ahead of us. We had 13 great quarters. Now, our focus is on having a fourth great year in a row. That requires us to have a strong fall season. We have ammo in the gun and we are ready to fire.”
Lundgren also put a positive spin on holiday, which has many retailers and Wall Street analysts concerned since it has six fewer days than last year. But Lundgren said he believes that could work in Macy’s favor, creating more of an urgency among consumers to shop sooner, and helping stores to turn inventory faster and make more money. Last year, he noted, the holiday seemed to drag before the final rush came. “It just went on and on.”