Macy’s Inc., largely impacted by soft sales trends and charges related to store closings and severances, reported that fourth quarter net earnings dropped 13.1 percent to $472 million from $543 million.
Comparable sales in the quarter ended Jan. 28 were down 2.1 percent, while total sales were down 4 percent to $8.52 billion, from $8.87 billion.
The full year results saw an even steeper decline in net income, which dove 43 percent to $611 million, from $1.07 billion. Total sales came to $25.78 billion, down 4.8 percent from $27.1 billion in the year before. Comparable sales declined by 2.9 percent.
Macy’s also revealed that its previously announced management transition will occur on March 23, when Jeff Gennette, president, will step up to chief executive officer, succeeding Terry J. Lundgren who will continue as executive chairman.”While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” said Lundgren. “These include continued improvement in our digital platforms, the rollout of our new approach to fine jewelry and women’s shoes, an increase in exclusive merchandise and the refinement of our clearance and off-price strategy. We also took a big step forward in rightsizing our physical footprint and restructuring our entire organization. The combination of these initiatives will help us gain market share, return to growth and drive enhanced value for our shareholders over time.
“We will be investing for the future in 2017. Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster,” Lundgren said. “Key to this is enhancing the customer experience in our stores where we are developing and testing concepts that feature new merchandise and entertainment options alongside enhanced technology to make shopping simpler. Additional initiatives that we believe will improve sales trends in 2017 include continued omnichannel improvements, an updated marketing strategy and a simplified pricing structure.”
Lundgren said Macy’s made progress on its real estate strategy where transactions of 2016 generated cash proceeds of about $675 million “which is helping to fund continued reinvestment in the business. We also began work on deriving value from our partnership with Brookfield Asset Management,” which is working on plans to redevelop and monetize potentially up to 50 properties. Development projects could include retail as well as alternative uses, such as multifamily housing, hotels and offices. The projects range from the complete ground-up redevelopment of a building to the development of parcels in a parking area, while maintaining a store presence.
“We are also developing strategies that will help create value for Herald Square while making the store an even more vibrant retail experience,” Lundgren added.
For the full year 2016, adjusted earnings were $3.11 a diluted share, exceeding the most recent guidance of $2.95 to $3.10
The company shuttered 66 stores last year and plans to close another 34 over the next few years, for a total of 100 closings. In fiscal 2016, the company opened 24 Bluemercury freestanding stores, a Macy’s Backstage freestanding store, a full-line Macy’s store and one Bloomingdale’s Outlet.
Fourth quarter 2015 operating income included $177 million of impairments, store closing and other costs. Excluding these items, operating income for the fourth quarter of 2015 was $1.113 billion or 12.6 percent of sales.
For 2016, operating income totaled $1.32 billion, or 5.1 percent of sales, compared with operating income of $2 billion, or 7.5 percent of sales in 2015.