Lundgren: Macy’s ‘Fell Short’ In Q1

For the first quarter of its fiscal year, ended May 2, Macy’s, Inc. posted earnings of $193 million, or 56 cents per diluted share, versus $224 million, or 60 cents per diluted share, in the year-earlier period. Comparable sales fell by 0.1%, with company owned locations reporting weaker comp results, down 0.7%, the company announced.

Analysts polled by Thomson Reuters expected earnings of 62 cents per share on average.

First quarter sales sliped by 0.7% to $6.23 billion year over year, Macy’s reported. Operating income was $409 million versus $443 million for the 2014 quarter.

In a conference call, Karen Hoguet, Macy’s CFO, asserted that international tourism, hurt by a strong dollar, had an impact on Macy’s results. The tourism slowdown hit comparable store sales by about a point, she said. Also taking a toll on results were the implementation of a new organizational structure, which has been taking longer to execute than expected, labor-related work slowdowns through the West Coast ports, weaker than expected growth in the amalgamated core general merchandise, apparel and furniture business, and weather, which contributed to softer results particularly in northern versus southern stores in the United States. In addition, poor sales trends in fashion jewerly and watches, tabletop and housewares effected operations in the quarter, Hoguet said. On the other hand, furniture was among the segments that had better results.

“We had expected our first quarter sales to grow at a rate lower than our guidance for the full year,” Terry Lundgren, Macy’s chairman and CEO, said in announcing the results. “We fell short because of a confluence of factors. Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels. Moreover, sales were negatively affected by lower levels of spending by international tourists visiting major U.S. cities with flagship Macy’s and Bloomingdale’s stores, including New York City, Chicago, Las Vegas and San Francisco. The omnichannel reorganization in our merchandising, planning and marketing organizations announced in January and February also caused some temporary disruption as executives in those areas learned new roles and procedures. Fortunately, most of these short-term issues are largely behind us.”

Lundgren stated that he expects business initiatives in place to revive momentum, including “an intensification of focus in our top 150 stores, major growth trends in active categories and accelerating success in dresses, the vanguard merchandise category in our omnichannel reorganization. The launch of our new Plenti loyalty rewards program last week was very strong, far exceeding our expectations. Our new Thalia Sodi private brand in ready-to-wear, shoes and fashion jewelry clearly is resonating with customers and selling very well.”

Lundgren added, “We are looking forward to the planned launch of the Macy’s Backstage off-price business this fall, with the first four pilot locations announced last week. We have already learned a great deal about the specialty beauty channel and spa business through our acquisition of Bluemercury, and we are excited about plans to accelerate the expansion of Bluemercury through its free-standing stores, omnichannel presence and private brand placement within Macy’s beauty departments. While these new growth initiatives are early in development, we are moving fast to test, learn and bring the most successful ideas to scale quickly.”

Macy’s operates 885 stores in 45 states, the District of Columbia, Guam and Puerto Rico under its own name and the Bloomingdale’s, Bloomingdale’s Outlet and Bluemercury banners, as well as the macys.com, bloomingdales.com and bluemercury.com websites. Al Tayer Group LLC operates Bloomingdale’s in Dubai under a license agreement.