Sluggish consumer spending is continuing to take its toll on Macy’s Inc.
The Cincinnati-based department-store chain said Wednesday that its first-quarter profit and revenues declined year-over-year and its comparable store sales also slid 6 percent.
Macy’s had already implemented a series of aggressive initiatives — including about 40 store closures as well as layoffs that could potentially impact thousands of employees — to boost the company’s margin recovery. Still, factors such as declining tourism in key retail markets and pressure from the e-commerce space persist.
Macy’s net income for the first quarter of 2016, which ended April 30, decreased 40 percent, to $116 million, or 37 cents per diluted share, from $193 million, or 56 cents per diluted share in the year-ago same quarter. Analysts had predicted diluted earnings per share of 36 cents.
Revenues declined 7.4 percent, to $5.8 billion, from $6.2 billion in the year-ago quarter — missing market watchers forecast for revenues of $5.9 billion.
Macy’s chairman and CEO Terry Lundgren said apparel was a particularly challenging category for the firm in Q1.
“We are seeing continued weakness in consumer spending levels for apparel and related categories. In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook,” Lundgren said in a release. “Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some center core categories — further intensifying the challenges associated with growing topline sales revenue.”
As a result of those factors, Lundgren said the company was compelled to adopt a more prudent outlook for the remainder of 2016.
Macy’s now expects full-year 2016 comparable sales on an owned-plus-licensed basis to decrease in the range of 3 to 4 percent, with comparable sales on an owned basis to be approximately 50 basis points lower. This compares with previous guidance for comparable sales on an owned-plus-licensed basis to decline by approximately 1 percent in fiscal 2016. Diluted EPS (excluding settlement charges) is now expected in range of $3.15 to $3.40. This compares with previous guidance for diluted EPS of $3.80 to $3.90.
“Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term,” Lundgren said. “We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value. We will continue to be guided by our M.O.M. strategies (My Macy’s personalization, Omni Choices, making Magic Connections with customers), which we believe resonate with our customers and remain a powerful formula for future success.”