Macy’s Inc., citing continued weak spending by domestic consumers and international tourists, reported sharp drops in both earnings and sales for the first quarter ended April 30.
Net income fell 40.4 percent to $115 million, from $193 million in the year-ago period, amid a 7.4 percent drop in sales to $5.771 billion, compared with sales of $6.232 billion in the same period last year. The year-over-year decline in total sales reflects, in part, the 41 stores closed in 2015. Comparable sales fell 5.6 percent in the first quarter this year.
On a per diluted share basis, earnings last quarter were 37 cents this year versus 56 cents a year ago.
Due to the disappointing results, Macy’s reduced its earnings and sales guidance for the fiscal 2016. Earnings per diluted share (excluding settlement charges) are seen ranging from $3.15 to $3.40, compared to previous guidance of $3.80 to $3.90. Macy’s now sees comparable sales declining 3 to 4 percent, compared with previous guidance for about 1 percent. Other department and specialty store chains are also expected to report weak results in the days ahead.
“We are seeing continued weakness in consumer spending levels for apparel and related categories,” said Terry Lundgren, Macy’s chairman and chief executive officer. “In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook. Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some center core categories — further intensifying the challenges associated with growing topline sales revenue. Given that the first quarter is a relatively small portion of the total year, we have an opportunity to make up some ground in the months ahead, and particularly in the fourth quarter. But as a result of these factors, we believe it is prudent to reduce our sales and earnings guidance for the 2016 fiscal year.
“Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term. We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value. We will continue to be guided by our M.O.M. strategies (My Macy’s personalization, Omni Choices, making Magic Connections with customers), which we believe resonate with our customers and remain a powerful formula for future success.”