Macy’s Sends Ominous Signal for Retailers in 2nd Quarter

Associated Press |

By ANNE D'INNOCENZIO

NEW YORK (AP) — Macy’s [ (M)] is lowering its annual earnings guidance after the department store struggled with a big earnings miss during the second quarter as it was forced to slash prices on unsold merchandise.

The department store said Wednesday a combination of factors including a fashion miss, slow sell-through of warm weather clothing on top of a worsening climate for tourism led to rising inventory levels.

Macy’s is the first major retailer to report quarterly earnings and what it revealed does not bode well for the sector. Shares of major retailers slumped before the market opened. Kohl’s, Dillard’s and Nordstrom all fell between 4% and 6%.


Like many other mall-based stores, Macy’s is under pressure to reinvent itself as shoppers increasingly buy online. Macy’s has been expanding its store labels and opening more off-price Backstage stores. It’s rolled out technology that allows customers to skip the line at the register.

It’s also been closing stores.

In February, the department store announced a multiyear restructuring program that that shrinks management ranks and, hopefully, makes the company more nimble.

President Donald Trump’s trade war with China is hammering retailers. The administration delayed a 10% tariffs on many goods found at the mall like some toys, clothing and shoes toys until Dec. 15, from Sept. 1. But Macy’s is grappling with a 25 percent hike on furniture products, which was implemented in May.

Macy’s reported second-quarter profit of $86 million, or 28 cents per share. That’s far from the per share earnings of 45 cents that Wall Street was looking for, according to a survey by Zacks Investment Research.

Revenue of $5.55 billion also fell short.

The company reported a 0.3 percent increase in sales at stores opened at least a year, in line with analysts’ expectations. The figure also includes licensed departments like cosmetics. It marked the seventh straight quarter of same-store sales increases though the growth has slowed down.

The company now expects earnings per share for the current year to be $2.85 to $3.05, down from its original forecast of $3.05 to $3.25 per shares. Analysts were expecting $3.05 per share.

Shares fell more than 13% in premarket trading Wednesday.

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Portions of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on M at https://www.zacks.com/ap/M

Source: AP News

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