Macy's star balloons are seen at Macys Parade Studio in Moonachie on 11/19/19. Thanksgiving Floats
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By ANNE D’INNOCENZIO and MICHELLE CHAPMAN AP Business Writers
NEW YORK (AP) — Macy’s weak third-quarter earnings report threw coal on the holiday season and offered the latest sign of challenges for traditional clothing retailers operating at malls.
Macy’s cut its profit and sales expectations for the year after posting a steeper-than-expected 3.5% drop in sales at stores opened at least a year including business from licensed departments like jewelry. It marked Macy’s first comparable store sales decline in almost two years.
The company, which also operates Bloomingdale’s, cited the late arrival of colder weather, meager tourist business, weak traffic at lower-tier malls and problems on its website.
Like many traditional clothing stores, Macy’s is under pressure to reinvent itself as shoppers increasingly buy online. Department stores in particular face challenges as shoppers are gravitating more toward experiences and away from clothing. And shoppers who are buying clothes are heading to places like T.J. Maxx and other off-price chains for deeper discounted items as well as discounters like Target Corp.
T.J. Maxx and Target, which operate stores at strip centers, have been upping their game when it comes to affordable fashion assortments. Target, for example, added mannequins to display their merchandise for the first time two years ago and created new trendy fashion brands that have lured shoppers to their stores.
The third-quarter earnings season offered the latest glimpse of shoppers’ shift despite moves by mall-based retailers to quicken deliveries and add more exclusive assortments.
Kohl’s Corp. cut its profit outlook for the year after a disappointing third quarter dragged down by poor women’s clothing sales. It posted an overall anemic 0.4% increase in sales at stores opened at least a year. J.C. Penney’s has long been struggling and is in the throes of another reinvention. That includes getting rid of appliances in favor of bolstering fashion. Sales at stores opened at least a year fell 9.3% in the quarter. Even when the detrimental effect of appliance sales are removed, same-store sales still tumbled 6.6%
Gap Inc. and Nordstrom Inc. are expected to report their earnings reports late Thursday.
Macy’s has pursued a number of strategies, including recently teaming up with resale site ThredUp. During a conference call on Thursday, Macy’s CEO Jeff Gennette said that the couple of dozen ThredUp shops were doing well, but the chain is in the midst of evaluating its long-term value. The company’s Bloomingdale’s division just launched a rental service that Gennette says is doing well. About 50% of the customers are millennials.
Macy’s has also focused on elevating the look of its top 150 stores with new curated merchandise tailored to its stores, better customer service and improved lighting.
Becoming leaner is another part of the process. Macy’s has been closing stores and cutting management as part of a restructuring announced in February.
Still, many analysts say their efforts are still not enough.
“The severity of the dip is a surprise, and it shows that Macy’s is in a bad position as we enter the holiday season and the potentially slower consumer retail economy that lies beyond,” said Neil Sanders, managing director of GlobalRetail in a report. “In our view, Macy’s failure on the sales line comes back to one central problem: The products it sells and the environments in which it sells them are not aligned with what consumers want. ”
Saunders said that such moves as the refurbishment of the men’s wear department at Macy’s New York flagship and the focus on the 150 stores helps, but he says it doesn’t move the needle in any meaningful way as the latest earnings report indicates.
The Cincinnati retailer posted earnings of $2 million, or a penny per share. Removing one-time charges, per share earns were 7 cents, better than the penny Wall Street expected, according to a survey by Zacks Investment Research.
Revenue declined to $5.17 billion from $5.4 billion, which is short of expectations.
For the year, Macy’s now foresees adjusted earnings between $2.57 and $2.77 per share. Its previous outlook was for $2.85 to $3.05 per share. For sales, the chain now anticipates a decline of 2% to 2.5%. It previously forecast sales would be about flat.
Analysts polled by FactSet predict full-year earnings of $2.78 per share.
Shares of Macy’s fell 3.5%, or 53 cents, to $14.49 per share in late morning trading.
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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
