Shares of Macy’s Inc. dropped sharply Wednesday morning after the retailer missed second-quarter profit projections and cut its outlook for the year, but Jeff Gennette’s plan to bring more shoppers to the store are shaping up.
On a conference call with analysts, the chairman and chief executive officer expressed some notes of caution given a second-quarter fashion miss and tariffs, but said a new program to add 40 ThredUp shops in Macy’s stores would stir up new business.
“We’re all testing opportunities in both re-commerce and rental to tap into the changing customer behavior, especially among Millennial and Gen Z consumers,” Gennette told analysts. “This month, we began a pilot with ThredUp, the world’s largest fashion resale marketplace in 40 Macy’s doors across the country. We know many consumers are passionate about sustainable fashion and shopping resale. This partnership gives us the opportunity to reach a new customer and keep them coming back to shop an ever-changing selection of styles, and brands, that we don’t typically carry.”
The initiative is part of a broader push to innovate at Macy’s.
“We will continue to innovate across all channels to strengthen relationships with our existing customers and to bring new customers into our brand,” referring to the launch of the second Story at Macy’s, and outdoor concept that partnered with Dick’s Sporting Goods. The company is also partnering with Caastle to launch a rental business at its Bloomingdale’s division, a move that Gennette suggested could also be made at the Macy’s business.
But while testing for the future, Macy’s also has to navigate the here and now, which is pretty choppy.
Net earnings fell to $86 million, or 28 cents a diluted share, from $166 million, or 54 cents, a year earlier. Profits came in well below the 55 cents Wall Street analysts projected on average.
Macy’s cut its estimate for adjusted earnings this year to a range of $2.85 to $3.05 a share, down from the $3.05 to $3.25 previously forecast after logging what it described as a “good start” to the year in the first quarter.
Investors weighed in by sending shares of Macy’s down 16 percent to $16.26 in morning trading.
Sales for the three months ended Aug. 3 dipped slightly to $5.55 billion from $5.57 billion, but comparable sales inched up 0.2 percent.
Gennette, in a statement earlier, said: “Macy’s Inc. delivered another quarter of comparable sales growth. That said, we had a slow start to the quarter and finished below our expectations. Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism. We took markdowns to clear the excess Spring inventory and are entering the fall season with the right inventory to meet anticipated customer demand.”
Gennette noted there were areas of strength, especially the company’s destination businesses.
“We continue to see healthier sales within our brick-and-mortar business, led by our Growth50 stores and Backstage expansion,” he said. “Our digital business posted its 40th consecutive quarter of double-digit growth, and mobile remained our fastest-growing channel.”
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