Macy’s lowers earnings guidance after struggles
Macy’s lowered its annual earnings guidance after the department store struggled with a big earnings miss during the second quarter as it was forced to slash prices on unsold merchandise.
The department store said Wednesday a combination of factors including a fashion miss, slow sell-through of warm weather clothing and an accelerating decline in international tourism led to rising inventory levels.
Macy’s also raised another red flag: Shoppers don’t have an appetite for higher prices in a ballooning
U.S. trade war with China. Macy’s was forced to raise prices on some luggage, housewares and furniture to offset the costs of a 25 percent tariff implemented in May on those types of goods.
Retailers are bracing for a 10 percent tariff targeting items like toys, clothing and shoes that had been scheduled for September. Tariffs on some of those items have now been delayed until December. Raising prices could be a big problem if the economy enters into a recession, analysts say.
Macy’s CEO Jeff Gennette told analysts during an earnings call that the retailer will not be increasing prices as a result of the 10 percent tariffs.
But he said the company will have to work hard with its vendor partners to offset costs if Trump goes ahead with his threat to ratchet the tariffs up to 25 percent in the event China won’t agree to a trade deal.
Macy’s is the first major retailer to report quarterly earnings and what it revealed does not bode well for the sector.
Shares closed down 13.27 percent, or $2.57 Wednesday.