Macy’s and Kohl’s raise concerns

bengaluru — Shares of department store chains Macy’s Inc and Kohl’s Corp tumbled on Thursday as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnaround may still be a long way off.

While the declines in samestore sales were not as bad as feared, gross margins at both the companies slipped as they continued to rely on heavy discounting and promotions, while spending more on shipping online orders.

Macy’s second-quarter gross margins fell to 40.3 per cent from 40.9 per cent a year earlier, while those of Kohl’s fell to 39.4 per cent from 39.5 per cent.

Macy’s also took a grim view of its same-store sales in the current quarter, estimating a drop of 2.5 per cent or more as it expects to remain “very promotional” in the fall season.

“We are operating in an environment of intense and disruptive competition, and our customer ... has more shopping options than ever,” Chief Executive Jeffrey Gennette said.

Department store chains have been struggling with declining mall traffic and tough competition from off-price retailers and ecommerce behemoth Amazon. com Inc, leading to a tenth straight quarter of falling samestore sales at Macy’s and sixth straight drop at Kohl’s.

To boost traffic, Macy’s plans to launch a new marketing strategy in September, followed by a new loyalty program, while taking Backstage, its off-price discount concept, to more stores.

However, Macy’s did not announce any new deals to monetize its real estate, a key source of capital to help turn its business around.

Sales at stores open more than 12 months fell 2.5 per cent at Macy’s and 0.4 per cent at Kohl’s. Analysts polled by research firm Consensus Metrix had estimated a 3 per cent drop at Macy’s and 1.5 per cent at Kohl’s. —