Shares at Macy’s Fall by 17% Due to Plummeting Profit
Macy’s on Thursday rang an early warning bell for the U.S. retail industry in posting results that signaled another tough quarter for retail department stores as well as mass merchandisers that have struggled in their attempt to adapt to the changing habits of shoppers, who are browsing more in stores and buying online.
The downward spiral for Macy’s continued, with its profit plummeting as sales dropped to begin the year. The stock price for the troubled retailer followed suit plunging by 17% on the day, to reach its lowest price in the past five years.
The retailing sector’s troubles likely are not over. J.C. Penney posted poor results on Friday, while Walmart, Target and L Brands report next week.
Only when the reporting season has been completed will a full assessment of the damage in what is considered an otherwise healthy economy in the U.S. become clearer. Analysts expect the worst.
Jeff Gennette the CEO at Macy’s said there are challenging and unusual times for the retail industry, especially for department stores that are mall-based.
For the three-month period that ended April 29, profit at Macy’s fell to $71 million, which represent a drop of 38% from last year during the same period of $116 million.
However, it was a decrease in the earnings that surprised analysts. Macy’s 23 cents a share earnings were far short of the 35 cents a share consensus by analysts.
Sales fell to $5.3 billion which was a drop of 7.5% from last year’s $5.8 billion during the same quarter.
Macy’s had announced previously plans to close 100 of its stores to increase cash as well as streamline operations.
CEO Gennette said there was a possibility that more locations would be closed down the road if the sale of real estate held by the company ends up being more lucrative that the sales activity of a given store.
Macy’s at one time was the gold standard for department stores and has been renowned for its annual Thanksgiving Day parade.
However, it has struggled trying to reinvent itself. The company made it much easier using the mobile app it has to shop, it has weeded out its underperforming stores and its plan to fill shelves with clothes and other items customers are not able to find anywhere else.
However, nothing has been able to halt its decline.
Kohl’s Thursday earnings report saw sales fall just 2.7%, but its work to help the bottom line was successful as it ended with $66 million in net income up from $17 million a year ago.