Macy’s Stock Gains On Q2 Beat & Turnaround Plans

Macy's
Macy's
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Macy’s Inc. means business.

After several quarters of sluggish performance, the department store chain today posted Q2 profit and revenues that topped forecasts. But CEO Terry Lundgren — who will step down in the first quarter of 2017 — is not stopping there.

Lundgren and incoming CEO and Macy’s president Jeff Gennette unveiled a series of initiatives — including plans to close 100 Macy’s stores — aimed at boosting the chain’s struggling bottom line and serving a more digital-minded consumer.

The news seemed to come as a pleasant surprise to investors who drove Macy’s stock up nearly 16 percent as of 10:20 a.m. ET today.

The firm said its Q2 reported net income dipped 95 percent, to 11 million, or 3 cents per diluted share, from $217 million, or 64 cents per diluted share in the comparable period. Adjusted diluted earnings per share, at 54 cents, topped market watchers’ forecasts for diluted earnings per share of 45 cents.

Sales also dipped 4 percent in the quarter, to $5.9 billion, but topped estimates for sales of $5.7 billion. Comparable sales on an owned plus licensed basis were down by 2 percent and 2.6 percent on an owned basis. Management attributed the comp decline to the closures of 41 underperforming Macy’s stores in fiscal 2015.

While year-over-year trends decelerated, Lundren said he was encouraged by “the distinct improvement” in the company’s sales and earnings in recent months.

A number of factors worked in our favor in the second quarter, including a normalized weather pattern, which contributed to a sales lift in our apparel business in particular,” Lundgren said in a release. “We also saw a smaller decrease in tourist spending during prime summer travel months, supported by strengthened promotional events designed to increase customer traffic and conversion.”

Macy’s reaffirmed its full-year guidance, which it slashed in Q1, and Lundgren said he remains upbeat that the latest initiatives will drive the company forward.

Over the past few months, we have been saying that a setback is a setup for a comeback, and we now believe we are set up well to proceed to a comeback,” Lundgren said. “Our sales strengthened month by month throughout the second quarter. This trend improvement gives us confidence in our plans for the back half of the year, and in our strategic planning for improvements to our business model going forward.”