Macy’s stock sinks on downbeat second quarter earnings and weak guidance


Shares of Macy’s Inc. (NYSE: M) plummeted on Wednesday after it posted second quarter earnings that were below estimates for the first time in almost two years.

Its profit declined 48% during the quarter due to in part to heavy discounting aimed at clearing inventory, a drop in international tourism, and low sales of warm weather apparel and women’s sportswear. The department store operator lowered its full-year earnings guidance but retaliated its revenue outlook.

Macy’s stock, which had lost 35% this year heading into Wednesday, was down 12% to $16.95 a share in afternoon trade.

M Earnings & Outlook

Net income in the second quarter fell to $86 million or $0.28 a share from $166 million or $0.53 a share in the year-ago period. Revenue slumped slightly to $5.55 billion from $5.57 billion a year earlier. Analysts surveyed by Refinitiv had expected earnings of $0.45 per share on sales of $5.55 billion.

Same store sales on an owned basis rose 0.2% while on an owned plus licensed basis rose 0.3%. Analysts had expected same store sales growth of 0.4% on an owned plus licensed basis.

For 2019, Macy’s expects adjusted EPS of $2.85 to $3.05 from its previous guidance of $3.05 to $3.25. Net sales are still expected to be approximately flat and comparable sales on both an owned and owned plus licensed basis to be flat to up 1%. Wall Street expects full year earnings of $3.05 per share.

Macy’s CEO Comments

Macy’s Chairman and Chief Executive Jeff Gennette said, “Macy’s, Inc. delivered another quarter of comparable sales growth. That said, we had a slow start to the quarter and finished below our expectations. Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism.”

“We took markdowns to clear the excess Spring inventory and are entering the Fall season with the right inventory to meet anticipated customer demand. While we had seasonal inventory challenges in Spring, there are many areas of the business that are performing well, notably our Destination Businesses. We continue to see healthier sales within our brick and mortar business, led by our Growth50 stores and Backstage expansion,” added Gennette.

Macy’s Inc. Profile

Macy’s operates about 690 department stores under the brands Macy’s and Bloomingdale’s, and more than 180 specialty stores under the names Macy’s Backstage, Bloomingdale’s The Outlet, and Bluemercury.

Macy’s also operates e-commerce sites, owns 65% of a Chinese e-commerce joint venture, and licenses two Bloomingdale’s stores in the United Arab Emirates and Kuwait. Women’s apparel, accessories, shoes, cosmetics, and fragrances constitute approximately 61% of Macy’s sales. The retailer has headquarters in Cincinnati and New York City. – Warrior Trading News