Macy’s Inc. is the latest department store to get clobbered with disappointing holiday sales, and the department-store giant has announced big changes to get back on track.
Pressured by unseasonable weather, sluggish store traffic and more competition online, the retailer said its November and December comparable-store sales slipped 4.7 percent on an owned-plus-licensed basis, compared with the same period last year. On an owned basis, the firm said comparable store sales declined 5.2 percent.
“That said, we are buoyed by a very strong performance in our digital business, with continued double-digit increases in online sales,” said Macy’s Chairman and CEO Terry Lundgren.
Lundgren said the company filled 17 million online orders at Macy’s and Bloomingdale’s in November and December — a 25 percent jump over last year.
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But as a result of the tough 2015, Macy’s announced several changes, many of which are aimed at growing omnichannel projects and cutting expenses by $400 million.
In the short term, Macy’s still plans to close a total of 40 stores — 36 in early spring 2016 — as previously announced. Four locations closed in the last quarters of 2015.
Other measures the company is taking to cut costs include eliminating and reorganizing jobs in stores and in the back office, closing its credit and customer-service facility in St. Louis and consolidating the grouping of Macy’s stores into five regions and 47 local districts, from the current structure of seven regions and 58 local districts. Around 4,500 employees or positions will be affected across the brands.
“In today’s rapidly evolving retail environment, it is essential that we maintain a portfolio of the right stores in the right places. So we will continue to add stores selectively while also being disciplined about closing stores that are unproductive or no longer robust shopping destinations because of changes in the local retail shopping landscape,” said Lundgren.
It’s been a tough holiday for department stores, which have taken a sales beating from unseasonably warm temperatures and a heavily promotional environment that hit earlier this year. Macy’s has struggled to find its stride in 2015 overall, with three consecutive quarterly revenue misses.
Earlier in the week, analyst Oliver Chen at Cowen & Co. reduced his estimates for Macy’s, citing “weak traffic throughout holiday, unfavorable weather; weakness among key handbag partners, such as Michael Kors, and national brands, including Ralph Lauren and Tommy Hilfiger; the stronger [dollar] impacting tourism … and aggressive promos.”
Investors seemed to applaud the announcement. The company’s share prices were up almost 5 percent in after-hours trading to around $38.02.
Macy’s said it is adjusting guidance as a result of the sluggishness. In the fourth quarter, the company said to expect guidance to range from $2.18 to $2.23 per diluted share, versus the previously guided $2.54 to $2.64 per share.
Full-year comparable-store sales are expected to decline 2.7 percent, from the previously estimated 1.8 percent to 2.2 percent. Earnings per diluted share for fiscal year 2015 are expected to range from $3.85 to $3.90, instead of $4.20 to $4.30.
The firm next reports earnings on Feb. 23.