Coverage: Macy’s earnings and the retail malaise
New York-based retailer Macy’s reported earnings Wednesday that beat expectations, but its sales were down 7 percent, and that caused tremors throughout the retail industry.
Fred Imbert of CNBC.com had the news:
The retail giant posted first-quarter adjusted earnings per share of 40 cents, compared to 56 cents a share in the year-earlier period.
Revenue for the quarter came in at $5.77 billion, against a comparable year-ago figure of $6.23 billion.
Wall Street expected Macy’s to report earnings per share of 36 cents on revenue of $5.93 billion, according to a Thomson Reuters consensus estimate.
The retailer lowered its fiscal 2016 guidance to a range of $3.15 to $3.40 a share, from $3.80 to $3.90 a share.
“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,” Terry J. Lundgren, Macy’s chairman and chief executive officer, said in a statement.
The bleak start to 2016 continues a disappointing streak for Macy’s. But it also stokes fear in the wider retail industry about how much consumers will spend in the months ahead. The conventional wisdom has been that as the economy improves, shoppers will start buying gear to refresh their closets and redecorate their living rooms. And yet, despite low gas prices and a jobless rate hovering near a post-recession low, consumers just aren’t hitting the mall.
“We’re, frankly, scratching our heads. We see the same economic data you all see,” said Karen Hoguet, Macy’s chief financial officer, on a conference call with investors.
Hoguet also did not seem particularly upbeat that the consumer would change course anytime soon and give the retailer a jolt. Macy’s depends heavily on spending from international tourists at its flagship locations in major cities, and has recently suffered as those travelers held tight to their pocketbooks due to the strength of the U.S. dollar. Macy’s once predicted such caution would be something of a temporary blip, but on Wednesday Hoguet indicated that executives see the headwind continuing. And she did not seem particularly optimistic that domestic shoppers would open their wallets wider either.
Investors had a lot of questions for Hoguet, including why in-store sales impacted by weather weren’t made up online, whether the retailer was getting push-back from big brands over low door counts and what Macy’s is doing to make the brick-and-mortar experience more exciting to get people in the doors.
“You are really helpful with your comments and what seemed like somewhat of an optimism on the way the customer and the economy is functioning. So how do you help us reconcile that versus what you’re seeing and how you’re thinking about that bigger picture in terms of what seems like different trends fundamentally versus a certain health in the customer and the economy?” one asked.
Hoguet replied that the economic data show consumers are saving more and have more discretionary income, so conventional wisdom would dictate that they’d be spending more.
“I would say that we too are somewhat puzzled by the data that we’re seeing on the consumer and the traffic we’re seeing on the stores and on the site,” she said.