Macy’s chief financial officer Karen Hoguet spoke at Morgan Stanley’s consumer conference in New York on Wednesday about the challenges that retailers have faced this year.
Hoguet thought that after the port strike and a slow down in tourist spending that the third quarter would finally be the bounce back that retail needed. Unfortunately, that wasn’t the case. The tourists continued to stay away in even bigger numbers in the third quarter and the warm weather didn’t help with local consumers.
In the big, profitable stores, the tourist slowdown impacted Macy’s by 1.5 percent. Hoguet mentioned New York’s Herald Square, Bloomingdale’s 59th Street flagship and Macy’s store in San Francisco’s Union Square. She said tourists account for roughly 5 percent of the business in general at some stores, but in these important markets, it can reach double digits. She noted that Brazilian shoppers were the most noticeable group to quit shopping. Hoguet did say that in the fourth quarter Macy’s would be getting around the tourism issue, presumably meaning that U.S. consumers would be spending for the holidays.
When it comes to the weather she said, “It’s pretty hard to sell heavy coats and boots in the warm weather.” She also said cosmetics, accessories and shoes slowed, although cosmetics shouldn’t be affected by the weather. Hoguet did say that the company wasn’t taking early markdowns on the cold weather items that hadn’t sold yet.
Hoguet provided few details on Macy’s real estate strategy. She confirmed the company would create value through its real estate and that it was very much focused on doing that. She mused that it could be a joint venture, but stressed that there were no plans as of yet. As stated before, Macy’s has said it has no plans for a real estate investment trust at this time.
The company is sticking with its strategies and confirmed that a 14 percent earnings before interest, taxes, depreciation and amortization target was the right amount for Macy’s. Also, next year the company will begin testing the Backstage concept within its regular stores, making it a separate store that could be entered through the regular priced store.
Hoguet declined to give any insight on early holiday spending.