Macy’s Inc., facing tough competition from Amazon and offpricers and dealing with hesitant consumers, posted a 39 percent drop in net earnings along with a 7.5 percent decline in sales for the first quarter ended April 29.
Net earnings came to $70 million versus $115 million in the year ago period. Sales reached $5.34 billion versus $5.77 billion a year ago. Macy’s said the decline in total sales reflects, in part, store closings revealed in 2016.
Comparable sales were down 4.6 percent on an owned plus licensed basis.
However, Jeff Gennette, Macy’s president and chief executive officer, said “Our first quarter sales and earnings results were consistent with our expectations, and we remain on track to meet our 2017 guidance.”
He also said the company was “encouraged by the performance of the pilot programs we tested last year in categories like women’s shoes, fine jewelry and furniture and mattresses. We look forward to expanding these successful initiatives nationally this year and anticipate they will have a measurable impact on our performance starting in the second quarter, building through the fall. Additionally, our digital platforms showed continued strong growth in the first quarter.”
This year, Gennette added, “We are focused on taking actions to stabilize our brick and mortar business, including the testing and iteration of additional pilot programs in order to bring them to scale in future years. At the same time, we will invest to aggressively grow our digital and mobile business, while continuing the integration of our online and offline experience to allow our customers to shop the way they live.”
The first quarter results include real estate transactions of $96 million which were booked at $68 million, including $47 million from selling the downtown Minneapolis property. Macy’s plans to sell two more floors of its downtown Seattle store after having sold floors five through eight in 2015. This transaction is expected to close in fall 2017.
Looking ahead, Macy’s affirmed previous guidance of comparable sales, both owned and leased, declining between 2 percent and 3 percent this year. Total sales are expected to be down between 3.2 percent and 4.3 percent. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis.
Excluding the sale of the Union Square men’s building in San Francisco, anticipated settlement charges related to benefit plans and premiums and fees associated with debt repurchases, adjusted diluted earnings per share of $2.90 to $3.15 are expected in 2017. Last year, earnings per diluted share on an adjusted basis were $3.11.
In the first quarter, the company opened Macy’s stores in Murray, Utah, and Los Angeles, as well as 10 freestanding Bluemercury beauty stores and 11 Macy’s Backstage offprice stores inside existing Macy’s stores. Additionally, one Bloomingdale’s store opened in Kuwait under a license agreement with Al Tayer Group.
Macy’s is closing about 63 stores this year, and will shutter about another three dozen over the next few years. Most recently, the company added its store at Temple Mall in Temple, Tex., and another at the Mall at Tuttle Crossing in Dublin, Ohio, to the list of planned closings.