Macy’s, Inc. Earnings: Here’s What Went Wrong

Macy’s stock crashed on company’s weaker than expected earnings and disappointing full year guidance

On Wednesday, Macy’s, Inc. (NYSE:M) stock tumbled 14% to $40.84, after the company released its third-quarter earnings. It made a record for biggest single day decline since February 2009. The entity failed to meet earnings estimates due to reduction in expenditures by customers and strong dollar preventing tourists to shop on its stores. Year to date, the stock has slipped 28%.

Macy’s reported earnings per share (EPS) of $0.56, just slightly above the estimated EPS of $0.54. Net sales came in at $5.87 billion, missing the consensus estimate of $6.1 billion. The reported revenue has dropped 5.2%, as compared to the same quarter last year.

The corporation has witnessed disappointing revenues in nine out of past 10 quarters. Many analysts believe that the slowdown in the retail sales should be a great concern for all the brick and mortar retailers as consumers are moving away from physical store shopping.According to the business, its comparable store sales plummeted 3.6%, in contrast to analysts’ expectations of 0.2% growth.

Overall, the profit dropped to $118 million, or $0.36 per share, from $217 million or $0.61 it earned same quarter last year.

According to Macy’s chairman and CEO, Terry J. Lundgren, “We are disappointed that the pace of sales did not improve in the third quarter, as we had expected. Spending by domestic customers remained tepid, especially in key apparel and accessory categories. “

He further stated that the slowdown in purchases by foreign visitors continued to significantly impact company’s stores in tourist centers, which are some of Macy’s largest-volume and most profitable locations.

In the press release, the organization announced that it is reducing its earnings forecast for the full year 2015. It mentioned that it now projects earnings of $4.20-4.30 a share, excluding asset impairments, as compared to its previous forecast of $4.70-4.80 a share in earnings.

Macy’s also predicts that its same store sales will further drop 1.8% to 2.2%, as compared to previous guidance for flat sales.

Despite getting pressure from investors, the retailer revealed that it will not peruse splitting up its real estate asset as separate entity; instead it will continue to search for opportunities to redevelop or sell selected locations.

The departmental store chain announced in September that it will shut nearly 5% of its stores this year. There were stores that were closed due to the worldwide pandemic during 2020 and 2022.

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