Macy’s set to shrink as losses could exceed US$1.11 billion

SHARES JUMP

Macy’s Inc. said on Thursday it could rack up operating losses of up to US$1.11 billion in the first quarter, as the department store operator was forced to shut stores due to lockdowns aimed at curbing the spread of the new coronavirus.

“We anticipate that our sales recovery will be gradual and that for a period of time, we will be a smaller company,” chief executive Jeff Gennette said on a call with investors.

Shares jumped nearly 6 per cent at US$5.37 in lateday trading.

The global health crisis has forced brick-and-mortar retailers to tap credit lines, lay off employees and suspend dividends and buybacks in a bid to stay afloat amid store closures.

Just this month, several retailers, including J Crew, J.C. Penney and Neiman

Marcus Group, filed for bankruptcy after failing to cope with market uncertainties and mounting debt.

Macy’s, which shut all of its 775 stores on March 18, hired investment bank Lazard Ltd. to explore options for bolstering its finances, Reuters reported last month.

While online sales have helped, they weren’t enough to offset losses relating to store closures, and from suits to dresses, apparel sales have been “soft,” Gennette said.

However, fine jewelry, kids and home were categories that performed better than others during the pandemic, he said.

Macy’s will continue to monitor consumer behaviour and expand its packaged food offerings and more, he said.

The largest U.S. department store operator by sales, Macy’s expects an operating loss of between US$905 million and US$1.11 billion in the first quarter, and sales of US$3 billion to US$3.03 billion, down from US$5.50 billion a year earlier.

The loss excludes estimated pre-tax non-cash goodwill and asset impairment charges for the quarter.

The 161-year-old retailer started reopening stores on a state-by-state basis on May 4. As of this week, about 190 stores of Macy’s and Bloomingdale’s, a chain that belongs to Macy’s, had reopened.

Macy’s expects most stores to reopen by late June, including its flagship Herald Square store, which stretches over an entire block in the heart of Manhattan in New York City.

OUR SALES RECOVERY WILL BE GRADUAL ... WE WILL BE A SMALLER COMPANY.