Aug 14, 2014
Macy's cuts same-store sales forecast, shares drop
Aug 14, 2014
(Reuters) - Macy's Inc cut its full-year same-store sales forecast, after second-quarter sales failed to make up for weakness in the first quarter when harsh weather kept shoppers away.
Macy's earnings for the quarter ended Aug. 2 also missed the average analyst estimate as the company discounted heavily to win business, squeezing gross margins.
Shares of the company, which also owns the high-end Bloomingdale's chain, were down 5 percent in early trading on Wednesday.
Macy's said it expects same-store sales to increase 1.5 percent to 2 percent for the full year. It had earlier forecast an increase of 2.5 percent to 3 percent.
"...Many customers still are not feeling comfortable about spending more in an uncertain economic environment," Chief Executive Terry Lundgren said in a statement.
U.S. retail sales unexpectedly stalled in July, data showed on Wednesday, pointing to some loss of momentum in the economy. The sales were the weakest since January.
Shares of Macy's rivals Kohl's Corp and Nordstorm Inc were down 2.7 percent and 1.8 percent respectively.
Macy's stores sell clothing, accessories, jewelry and home goods to mainly middle-class shoppers.
The company, which has remodeled many stores, including its flagship Herald Square store in Manhattan, plans more promotions and discounts for the important back-to-school season as it tries to make up for lost sales.
The company stuck to its full-year earnings forecast of $4.40 to $4.50 per share.
Analysts remained positive on Macy's long-term prospects.
"Its focus on improving the merchandise assortment while enhancing the customer experience both in stores and online will likely continue to drive strong results," Stifel Nicolaus analysts wrote in a research note.
Three brokerages including Stifel reiterated their "buy" ratings on the company's stock.
Macy's has spent nearly $2 billion in IT and e-commerce projects over the past five years and has benefited from services such as in-store pickups and ship-from-store.
The ship-from-store service allows customers to order from another Macy's store if the item is not available and have it sent to their home. This helps Macy’s keep a tight hold on inventories, especially at its smaller stores.
The in-store pickups will be available at all Macy's stores in the fall and holiday shopping season, the company said.
Same-store sales, which include sales at macys.com and bloomingdales.com, rose 3.4 percent in the second quarter.
Net income rose to $292 million, or 80 cents per share, from $281 million, or 72 cents per share, a year earlier.
Total sales rose 3.3 percent to $6.27 billion, after declining about 2 percent in each of the previous two quarters.
Analysts on average had expected earnings of 86 cents per share on revenue of $6.3 billion, according to Thomson Reuters I/B/E/S.
Shares of the company were down 4.7 percent at $56.95 in early trading.
(Reporting by Devika Krishna Kumar in Bangalore; Editing by Don Sebastian)
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