Macy’s experienced a continued slide in both net sales and earnings in its first quarter. At the same time, the retailer offered a near-term plan to improve its performance.
For the first quarter ended April 10, Macy’s posted company net income of $116 million, or 37 cents per diluted share, versus $193 million, or 56 cents per diluted share, in the year-earlier quarter. Macy’s reported adjusted earnings per diluted share as 40 cents, excluding a non-cash settlement charge related to the company’s retirement plans, which beat a MarketBeat published analyst average estimate by a penny.
Comparable sales, including owned and licensed stores, slipped 5.6% in the first quarter. Comps at company-owned stores declined by 6.1%. First quarter sales sagged 7.4% to $5.77 billion, however, Macy’s asserted that the year-over-year decline reflected, in part, 41 stores that closed in 2015.
Operating income was $276 million versus $409 million in the quarter a year prior. The $276 million included non-cash settlement charges of $13 million, $9 million after tax, related to the company’s retirement plan. With that element excluded, first quarter operating income was $289 million.
“We are seeing continued weakness in consumer spending levels for apparel and related categories,” said Terry Lundgren, Macy’s chairman and CEO. “In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook. Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some center core categories, further intensifying the challenges associated with growing topline sales revenue. Given that the first quarter is a relatively small portion of the total year, we have an opportunity to make up some ground in the months ahead, and particularly in the fourth quarter.”
Lundgren added, “Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term. We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value. We will continue to be guided by our M.O.M. strategies, My Macy’s personalization, Omni Choices, making Magic Connections with customers, which we believe resonate with our customers and remain a powerful formula for future success.”
Macy’s detailed an improvement plan, including the continued rollout of in-store pilots of Macy’s Backstage, with six stores-in-stores open and nine more planned, and Bluemercury, with five in-store shops already open and 22 planned for opening by the fourth quarter. In terms of merchandise, Macy’s highlighted a holiday gift strategy that will promote technology innovations in partnership with Brookstone.
At the same time, in addition to cost reduction measures, Macy’s said that it continues evaluating proposals from potential partners for joint ventures or similar arrangements involving flagship locations and mall-based store portfolio. Macy’s also will maintain efforts to monetize unproductive real estate.
In fiscal 2016, Macy’s expects to open a new Macy’s store in Kapolei, HI, as well as 42 additional Bluemercury locations, 16 Macy’s Backstage locations, one freestanding and 15 inside Macy’s, and a Bloomingdale’s Outlet store in Orange, CA.