Macy’s slashed its full-year profit and sales expectations as the department store chain struggles to lure shoppers seemingly in an extended funk.
First-quarter income tumbled 40 percent and revenue fell 7.4 percent, sending shares down more than 5 percent Wednesday afternoon.
The report from Macy’s, following dismal sales numbers from the Gap earlier in the week, dragged down the entire retail sector in premarket trading.
After a brutal year-end shopping season, retailers are muddling through another spending slump that began in mid-March.
Macy’s had been a stand-out among retailers following the recession. Yet in the last year, the malaise suffered by others seemed to catch up with Macy’s.
Department stores are face increasing competition from online retailers like Amazon.com. Macy’s also has acknowledged that Americans, rather than spending money on clothes and accessories, are going out to restaurants or spas, vacationing, or plowing money into their homes.
When they do shop for clothes, increasingly they are doing it at discount stores like T.J. Maxx.
Macy’s is trying to overhaul its business to counter slumping sales. It opened a group of Macy’s Backstage stores last fall to compete with T.J. Maxx and other off-price stores. It’s also expanding online and has acquired Bluemercury, an upscale beauty and spa company.
The company said Wednesday that it plans to accelerate initiatives that are working and plans nine additional Macy’s Backstage stores by the fourth quarter. It’s also investing in more full-time sales people and enhanced online customer support.
“We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us, “said Chairman and CEO Terry Lundgren in a company release.
First-quarter net income was $115 million, or 37 cents per share. Adjusted per-share earnings were 40 cents per share, 4 cents better than Wall Street had expected, according to FactSet.
Revenue fell to $5.77 billion from $6.23 billion in the year-ago quarter. That was worse than the $5.93 billion analysts were projecting.
Revenue at stores open at least a year fell 5.6 percent. That marked the fifth consecutive quarter of declines, and those declines are accelerating. Comparable store sales have now fallen in seven of the last 10 quarters.
Macy’s now expects earnings per share to be in the range of $3.15 per share to $3.40 per share for the year. That compares with previous guidance of $3.80 to $3.90 per share.
Macy’s expects comparable store sales this year to fall between 3 percent and 4 percent, which was much worse than the 1 percent decline that industry analysts had been projecting.
Macy’s shares were trading Wednesday at their lowest levels in more than four years. The stock was down $5.11, or 13.8 percent, to $31.88.