Macy’s Inc. had a tough third quarter.
Citing unfavorable weather, weak international tourism and results at lower tier malls, the retailer reported a drop in third-quarter net income to $2 million from $62 million in the year-ago period.
Comparable sales were down 3.5 percent in the quarter ended Nov. 2, and total sales slipped to $5.2 billion from $5.4 billion.
Earnings before interest, taxes, depreciation and amortization were $300 million versus $381 million.
“After seven consecutive quarters of comparable sales growth, we experienced a deceleration in our third-quarter sales. While we anticipated a negative comp as we were lapping a very strong third quarter last year, the sales deceleration was steeper than we expected,” said Jeff Gennette, chairman and chief executive officer of Macy’s Inc.
“Having cleared the excess inventory we faced earlier in the year, we were able to take a more balanced approach to sales and profit in the quarter, resulting in significantly improved margin compression versus the first half of the year.
“Our third-quarter sales were impacted by the late arrival of cold weather, continued soft international tourism and weaker than anticipated performance in lower-tier malls,” Gennette added. “We also experienced a temporary impact on our e-commerce business due in part to work on the site in preparation for the fourth quarter. The team has completed that work, the site is upgraded and our customers can expect an improved experience this holiday season. Based primarily on the impact of our third quarter sales trend, we are updating our annual guidance.”
The $25 billion Macy’s is now expecting diluted earnings per share for 2019 in the range of $2.57 to $2.77 versus earlier guidance of $2.85 to $3.05. Comparable sales are seen down 1.5 to 1 percent, versus prior guidance of flat to up 1 percent.
Despite the disappointing third quarter, Gennette said, “We have confidence in our holiday strategies. The Macy’s, Bloomingdale’s and Bluemercury teams are aligned and committed to delivering a great experience for our customers in our stores, on our digital sites and through our mobile apps. We have fully updated our Growth150 stores and completed the 2019 expansion of Backstage,” Macy’s off-price departments. “We have curated an expanded gift assortment with great values in all categories and developed a powerful marketing calendar for both our best and occasional customers. This holiday season, we also have even more flexible, secure and convenient fulfillment options for our customers including pick up in stores and same-day delivery.”