Macy's Spells Bad News for Retailers -- Barron's Blog
DOW JONES & COMPANY, INC. 10:32 AM ET 5/11/2016
The sales slump at Macy's ( M) is not a new story. But the drop in revenue during the fiscal first quarter was far worse than anything Wall Street feared, sending investors racing for the exit. The department store giant fell more than 12% to a recent $32.55.
But it also spelled bad news for the rest of the retail sector. Nordstrom ( JWN) fell 6.3% while J.C. Penney ( JCP) dropped 3.8% and Target ( TGT) declined 4.7%.
In the ETF realm, with SPDR S&P Retail ETF ( XRT) fell 3.4% and the Market Vectors Retail ETF ( RTH) dropped 1.3%. The Consumer Discretionary Select Sector SPDR ( XLY) lost 1.4%.
Granted, the 40 cents a share earned during the quarter beat the Street's expectations. Still, Macy's slashed its full-year financial forecasts after reporting that revenue fell 7.4% to $5.77 billion and same store sales dropped 6.1%.
The Street had expected a 3.5% decline in same-store sales, following the 4.8% decline posted during the fourth quarter of last year.
Macy's now expects to earn between $3.15 a share and $3.40 a share this year as same store sales fall roughly 4%. Previous forecast guided to profit per share of $3.80 to $3.90.
Here's what Cowen's Olive Chen had to say:
Disciplined SG&A Allows for 1Q EPS Beat, but Comps Miss Is Concerning. Despite negative sentiment coming into 1Q EPS print, we believe the 1Q owned comp of -6.1% (vs. Street -3.4%), mgmt. commentary about a mid-March slowdown, & -15% FY16 EPS guidance cut are factors sending the stock lower this morning...1Q comps came in well below expectations as mgmt. indicated continued weakness in consumer spending for apparel and related categories, double-digit spending reductions by International tourists to Macy's flagship stores, and challenges in some center core categories. The primary culprit for the 1Q comps miss was the sales trend meaningfully slowing beginning in mid-March, which was only several weeks after M provided its original guidance on Feb. 23rd. We note 1Q comps on a 2-year stack deteriorated to - 6.8% vs. 4Q's 2-year run rate of -2.8%. 1Q comps on an owned plus licensed basis
Under pressure from activist investor Starboard Value LP to spin off its real estate holdings, the company has signaled it might be open to such transactions. On Wednesday, the company said it is evaluating proposals from potential joint venture partners involving Macy's flagship locations and the company's mall-based store portfolio.
News 
Market Data 
Discover 
AI
