Macy’s sales, Kohl’s profit fall as department stores struggle
NEW YORK — Macy’s sales fell as it had a hard time pulling shoppers through its doors and Kohl’s reported a drop in quarterly profit Thursday, underscoring just how challenging the holiday shopping season will be for department store chains.
Like many retailers, Macy’s and Kohl’s have wrestled with weak sales as customers go online. Department stores, which are heavily dependent on clothing sales, are seeing more competition there as Amazon expands further into fashion and so-called off-price chains such as T.J. Maxx add more stores.
Macy’s Inc. reported that its third-quarter earnings more than doubled as it cut costs, which included eliminating jobs, scaling back on inventory and closing some locations. It has been expanding into off-price stores and launched a loyalty program last month that it hopes will attract more shoppers.
Still, revenue at stores open at least a year fell for the 11th straight quarter. The drop of 4 percent was worse than the 2.9 percent analysts expected.
At Kohl’s Corp., hurricanes and unseasonal weather weighed on sales, but it did have a strong backto-school shopping season and it raised its outlook for the year. Same-store sales edged up 0.1 percent, better than the 0.6 percent decline analysts had expected.
Business was helped by picking up market share from store closures of rivals in certain regions, the company said.
It has been a tough year for retail overall, with store closings on pace to top the worst year of the recession and several wellknown chains filing for bankruptcy protection because of their debts. Mall shopping is down, and that hits department store chains particularly hard. So the holiday season, always important, is even more critical.
Stores are planning early holiday promotions and some are opening earlier on Thanksgiving to try to scoop up some traffic. Kohl’s and J.C. Penney are opening an hour earlier on Thanksgiving than a year ago.
Macy’s is increasing the number of temporary workers it is hiring for distribution and warehouses for the holiday season as it chases fast-growing e-commerce sales.
Kohl’s, meanwhile, has expanded its partnership with Amazon to sell devices such as the Echo and Fire tablets at some stores. It also will pack and ship eligible Amazon return items for free at stores offering the service.
“We believe both of these tests have the potential to drive incremental traffic to our stores, which as you know is our No. 1 priority,” CEO Kevin Mansell said during a call with analysts Thursday.
Analyst Neil Saunders, managing director of GlobalData Retail, said he was encouraged that Kohl’s “is innovating with both new products and services,” but criticized Macy’s for “the patchiness of its turnaround program.”
“While there is no doubt that the company has made progress across some areas, change is far from comprehensive or far-reaching,” he wrote. “We get the sense that Macy’s fixes issues in a piecemeal way and that it lacks a unified vision for the future of the business.”
Macy’s earned $36 million, or 12 cents per share, in the third quarter. Earnings adjusted for one-time gains and costs were 23 cents per share. The results topped Wall Street expectations, but the bar was set low.