Reuters / U.S. department store operator Macy’s Inc reported a much bigger-than-expected drop in quarterly profit and sales, continuing its uphill struggle to attract customers amid a slump in demand for apparel and the shift toward shopping online.
Macy’s shares fell as much as 10 percent to $26.40 on Thursday to levels last seen in 2011, and pulled down shares of rivals across the department store industry.
Sales at Macy’s stores open at least a year, including sales in departments licensed to third parties, fell 4.6 percent in the first quarter. That was steeper than the 3.5 percent drop analysts polled by research firm Consensus Metrix had expected.
Macy’s and other department store chains such as Kohl’s Corp and J.C. Penney Co Inc, have struggled for years with declining mall traffic and tough online competition, and are trying to cope by cutting costs via store closures, selling or leasing their real estate and keeping inventory levels low.
While such efforts helped Kohl’s to some extent in the latest quarter, they are yet to bear fruit at Macy’s.
Merchandise inventories at Macy’s rose 4.2 percent in the quarter, due to a low sell-through. As a result, the company’s profit sank 39 percent to $71 million.
In contrast, inventories fell 2.2 percent at Kohl’s, helping the retailer post a better-than-expected quarterly profit, and sending its shares up 3.2 percent in early trading.
Kohl’s efforts to speed up its supply chain, localize merchandise in stores and use stocks in stores to fulfill online orders helped keep inventories low and boost margins, Chief Executive Kevin Mansell said on a conference call.
However, the company’s same-store sales fell 2.7 percent, much steeper than the 1.1 percent drop analysts’ had estimated.
Kohl’s earned a profit of 39 cents per share, beating the average analyst estimate of 29 cents, according to Thomson Reuters I/B/E/S.
Macy’s earned 24 cents per share on an adjusted basis, well below the 35 cents analysts on average had expected.
Macy’s net sales fell 7.5 percent to $5.34 billion, declining for the ninth straight quarter and missing the average analyst estimate of $5.47 billion.
J.C. Penney shares dropped nearly 4 percent in early trading on Thursday, while Nordstrom Inc declined 5.5 percent. The broader Down Jones general retailers index was down nearly one percent.
Nordstrom is scheduled to report results after markets close on Thursday, while JCP’s results are due on Friday.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D’Souza)
FILE PHOTO: The Macy’s logo is pictured on the side of a building in down town Los Angeles, California, U.S., March 6, 2017. REUTERS/Mike Blake/File Photo GLOBALES: Macy’s weak quarterly results hit department store shares
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