By Chelsey Dulaney
Macy's Inc. on Wednesday cut its sales guidance for the year
after reporting steeper-than-expected slides in second-quarter
sales and profit.
Chief Executive Terry J. LundSHYgren said the company was
disappointed with its second-quarter results, which were weighed
down 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 privately held Fung Retailing Ltd., which owns a network of
over 3,000 stores throughout Asia, to begin selling merchandise on
Alibaba Group Holding Ltd.'s Tmall Global platform later this year.
The partnership is the latest in a string of efforts by Macy's to
jump-start sales growth.
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 of Macy's fell 5.6% to $63.74 a share in early afternoon
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 advisers 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 hurt 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
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