Macy’s reports $35-million loss, calls it ‘excellent’
As it heads into the crucial holiday season, Macy’s Inc. may be on shakier ground than some thought.
The famed department store chain said Wednesday that it lost money during its fiscal third quarter and predicted that it would earn less during the holidays and the full year than Wall Street analysts had expected.
That raised concerns that Christmas spending could be weak and sent Macy’s shares tumbling. Retail giants Wal-Mart Stores Inc. and Kohl’s Corp. are scheduled to release their earnings today.
Macy’s has faced a challenging year as shoppers have scrimped on nonessential purchases. Like many chains, the Cincinnati-based retailer has closed stores and reduced its workforce to cut costs.
The chain lost $35 million during the three months ended Oct. 31, or 8 cents a share. That was a smaller loss compared with the same quarter last year, when the company lost $44 million, or 10 cents.
Sales also were down, dropping 3.9% to $5.28 billion from $5.49 billion in the same quarter last year, when retail sales began to fall dramatically industrywide. Sales at stores open at least a year, known as same-store sales and considered an important barometer of a retailer’s health, declined 3.6%.
Those results led Macy’s to improve its forecast for the full year, but analysts had expected more. Macy’s shares fell $1.57, or 8.1%, to $17.86.
Chief Executive Terry J. Lundgren said Macy’s third-quarter results were better than the company had expected and pointed to strong online sales, improved business at Bloomingdale’s and encouraging results from the chain’s new, locally focused merchandise structure.
“Given the difficult economic climate, we had an excellent quarter,” Lundgren said in a statement. “Our business improved progressively each month during the period, and we are entering the holiday selling season confident.”
Sales during the quarter were driven by moderately priced sportswear for men and women, coats, shoes, home textiles, housewares and mattresses. Weaker categories included dresses, fragrances, men’s shoes and handbags.
Karen Hoguet, Macy’s chief financial officer, said the company would try to stay on top of the market during the holidays by reacting quickly to consumer preferences.
“There is more uncertainty than usual in the environment,” Hoguet said in a conference call with analysts Wednesday.
Macy’s is “trying hard to forecast what this environment will mean for holiday sales and profitability,” she said. “It isn’t easy. Unfortunately, we all just have to wait and see.”
Michelle Clark, a Morgan Stanley analyst, said the retailer’s lower-than-expected fourth-quarter projections were likely to drag shares down. For apparel stocks to move higher, she said, companies need to improve sales, grow profits and provide favorable earnings projections.
“We think Macy’s shares could come under pressure today,” Clark wrote in a note to investors.
For the 39 weeks ended Oct. 31, the company’s sales totaled $15.6 billion, down 7.8% from total sales of $17 billion during the same period last year. On a same-store basis, year-to-date sales were down 7.5%.
Despite Macy’s loss and lower-than-expected projections, Bernard Sosnick, a retail analyst at Gilford Securities, said he was encouraged by the chain’s lighter inventory and its new merchandising structure.
This year, Macy’s has focused on grouping its stores by region in an effort to localize merchandise to specific stores. The company said the strategy helped it better meet local customer needs and preferences in each location.
“Macy’s has made steady and substantial progress. The important thing is this company has changed organizationally,” Sosnick said. “I feel all the arrows are pointing in the right direction.”
Macy’s operates more than 850 Macy’s and Bloomingdale’s department stores in 45 states, the District of Columbia, Guam and Puerto Rico.
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