Macy's Shares Tumble After Weak Quarterly Sales

NEW YORK, United States — As Americans abandon department stores, Macy's Inc. sales are falling even faster than expected.

The retailer’s shares plunged after it posted a 4.6 percent decline in same-store sales last quarter. Analysts had estimated a 3.5 percent drop. Earnings also came in well below projections, suggesting that cost-cutting efforts aren’t moving fast enough to offset the shrinking sales.

The results signal that new chief executive officer Jeff Gennette has a tougher job ahead of him than Wall Street imagined. The executive, who began running the chain in late March, faces declining foot traffic in malls, race-to-the-bottom discounts among his competition, and a shrinking customer base.

He’s betting that Macy’s can rebound by slashing expenses, shuttering stores and eliminating jobs. The Cincinnati-based company also is investing in e-commerce and its off-price brand, Backstage. But the efforts have been slow to pay off.

“We are focused on taking actions to stabilise our brick-and-mortar business,” Gennette said in a statement. “At the same time, we will invest to aggressively grow our digital and mobile business.”

Macy’s shares fell as much as 13 percent to $25.64 in early trading in New York after the earnings report. Even before the rout, the stock had slid 18 percent this year.

Excluding some items, profit amounted to 24 cents a share in the fiscal first quarter, which ended April 29. Analysts had estimated about 35 cents, according to data compiled by Bloomberg.

Kohl’s Corp., a department-store rival, reported similarly bleak sales in the first quarter. But its earnings were better than analysts projected. The Menomonee Falls, Wisconsin-based company posted a same-store sales decline of 2.7 percent on Thursday, compared with an estimated drop of 1.1 percent. Its profit amounted to 39 cents a share, 10 cents more than expected.

Maintains Forecast

Macy’s reiterated its forecast for the full year, saying that comparable sales would decline 2 percent to 3 percent. It expects earnings of $3.37 to $3.62 a share, excluding certain items.

As part of Macy’s cost-cutting strategy, it is closing 100 under-performing stores -- 68 of which are being shut down this year. This will eliminate about 4,000 jobs, on top of 6,200 cuts announced in January.

The company is looking to generate annual savings of $550 million, beginning this year. The money will be pumped into the retailer’s e-commerce business, Chinese operations and other units, such as its Bluemercury makeup division.

Macy’s is also looking for more real estate transactions, which generated about $673 million in cash proceeds in the last fiscal year. Brookfield Asset Management was hired in November and given a two-year window to create development plans for about 50 of Macy’s real estate assets.

Macy’s recently ended a 2015 agreement that allowed Men’s Wearhouse, a division of Tailored Brands Inc., to offer tuxedos within its department stores. The costs of the endeavor were higher than expected, and it didn’t generate enough of a return.

By Lindsey Rupp; editor: Nick Turner.