By Chelsey Dulaney
Macy's Inc. on Wednesday cut its sales guidance for the year
after reporting steeper-than-expected slides in sales and profit in
its second quarter.
Chief Executive Terry J. Lundgren said the company was
disappointed with its second-quarter results, which were weighed by
ongoing declines in tourist spending and troubles at West Coast
ports.
Mr. Lundgren said Macy's expects improvement in the second half
of the year. The company also unveiled on Wednesday a joint venture
with China's Fung Retailing Ltd. to begin selling merchandise on
Alibaba Group Holding Ltd.'s Tmall Global platform later this
year--Macy's latest effort to jump-start sales growth.
Still, Macy's cut its forecast for sales excluding newly opened
or closed stores, calling for the metric to be flat. It had
previously forecast growth of 2%. It expects total sales to fall
1%, compared with its previous forecast for 1% growth.
Shares in the company, up 2.7% this year, fell 1.2% to $66.70 a
share in premarket trading.
The company backed its earnings outlook of $4.70 to $4.80 a
share, primarily because of a $250 million gain from the sale of
real estate in downtown Brooklyn also announced on Wednesday.
Macy's has come under pressure from activist investor Starboard
Value LP to spin off its property in recent months. The retailer
has said it is evaluating spinoffs and other property moves. Macy's
said Wednesday that it has brought on real estate advisors to
"intensely study" its real estate portfolio for opportunities.
Meanwhile, Macy's reported a 2.1% decline in same-store sales
for the second quarter ended Aug. 1. When licensed departments are
included, sales fell 1.5%, steeper than the 1.3% drop analysts had
forecast, according to Consensus Metrix.
The company said its results were impacted by the removal of a
major promotional event and the delay of markdowns to clear out
inventory that had been held up in West Coast ports.
"Moreover, throughout the first half of the year, overall
consumer demand has been restrained in many of the categories of
merchandise we sell, and the strong U.S. dollar has led to
significantly lower international tourist spending," Mr. Lundgren
said.
The results extend a rough patch for a chain that dominates the
department store landscape but is having trouble posting solid
growth as shopper habits change. Earlier this year, the company
reassigned two top executives to focus on initiatives like a
budding outlet business designed to take the company beyond its
traditional mall-based operations.
The company has also announced plans to open off-price stores
called Macy's Backstage, and add higher end merchandise at its 150
best performing stores.
In all, profit fell to $217 million, or 64 cents a share, from
$292 million, or 80 cents a share, a year earlier. Analysts polled
by Thomson Reuters had expected 76 cents a share in earnings.
Total sales fell 2.6% to $6.1 billion, missing analysts'
estimates for $6.23 billion.
Gross margin narrowed to 40.9% from 41.4% a year earlier.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires