Macy’s reports 4th-quarter upswing
Retailer’s rise occurs three weeks after announced closings
NEW YORK — Macy’s reported stronger-than-expected sales and profits for the fourth quarter less than a month after it announced a major restructuring.
Macy’s shares rose 3% before the opening bell Tuesday but gave up those gains along with the broader markets. The shares fell 85 cents, or 5.5%, to close at $14.60.
The quarterly report comes three weeks after the department-store chain said it was closing 125 of its least productive stores and cutting 2,000 corporate jobs. It also says it is testing new smaller-store formats. The store closures represent one fifth of Macy’s total. They include about 30 that are in the process of closing and account for $1.4 billion in annual sales.
Macy’s, like its peers Nordstrom, Kohl’s and J.C. Penney, is dealing with stiffer competition and shoppers’ changing behavior. Department stores are seeing their customers increasingly favor off-price stores like T.J. Maxx for big discounts on name brands. They’re also renting and buying secondhand goods online. J.C. Penney is to report its fourth-quarter results Thursday, while Kohl’s and Penney are expected to report final quarterly figures next week.
The trade war with China has raised costs for most, and now, a new virus spreading from China is throwing a wrench in manufacturing facilities and supply chains. Macy’s says it is viewing 2020 as a transition year and reiterated its annual profit guidance, but said it’s too early to include the impact from the virus.
Macy’s expects a slowdown in products coming from Asia and is working with its suppliers to figure out contingency plans for certain items.
“As a fashion retailer, there is a shelf life” for products, Macy’s CEO Jeff Gennette said.
Overall, Macy’s has embraced several strategies as a way to pull customers back in the stores. That includes teaming up with resale site ThredUp.
The company’s Bloomingdale’s division debuted a rental service last year. And it’s been expanding its off-price concept called Backstage in many of its stores. It also has been upgrading the look of its top 150 stores in healthy malls. Those account for about half of its total store sales. Earlier in February, it said that it plans to upgrade an additional 100 stores this year.
Gennette said there was a significant improvement in the fourth quarter, including a “meaningful” sales uptick in the 10 shopping days before Christmas. Still, the company’s net income fell to $340 million, or $1.09 per share, in the quarter ending Feb. 1. That compares with $740 million, or $2.37 per share, in the year-ago period. Adjusted earnings per share was $2.12. Net sales were $8.34 billion, down slightly from $8.45 billion a year earlier.
Analysts were expecting earnings per share of $1.96 and net sales of $8.32 billion, according to FactSet.
Same-store sales, a key measure for a retailer’s health, slipped 0.5%, including licensed businesses like jewelry. That was still an improvement from the 3.5% drop seen in the previous quarter.