Aug 14, 2013
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Macy's same-store sales fall as consumers pull back

Aug 14, 2013

NEW YORK, United States - Macy's Inc on Wednesday reported an unexpected decline in sales and blamed consumers' hesitation to spend on non-essentials, leading to deeper markdowns and a disappointing profit.

Its shares fell about 4.1 percent, or $2.02, to $46.45 in early trading.

The retailer said comparable sales and overall sales slid 0.8 percent in the second quarter. Analysts expected comparable sales to rise 2.3 percent, according to Thomson Reuters.

Chief Executive Terry Lundgren in a statement blamed the results on the "continuing uncertainty" people have about spending on items they do not need in a tough economy. In May, the retailer had warned that its budget-conscious shoppers were being cautious again.

The results come a week after a group of large U.S. retailers posted disappointing sales for July and had to resort to discounts to spur buying.

"The sales environment is tough. The low-to-mid end customer is still struggling," said Edward Jones analyst Brian Yarbrough.

Many U.S. shoppers, including Macy's middle-class customers, are contending with payroll taxes that are higher than a year ago and a job market that is only improving at a snail's pace.

In a research note earlier this week, Morgan Stanley analyst Kimberly Greenberger said the quarter was generally tough for department store chains in part because of less mall traffic, particularly in July.

Still, Lundgren said he was "encouraged" so far with the back-to-school season, the second-most important time of year for chains like Macy's and rivals Kohl's Corp and J.C. Penney Co Inc, after the holiday season.

Despite the sales decline, merchandise inventory levels were up 6 percent at the end of the quarter, something Edward Jones' Yarborough said could portend more discounting.

But Macy's said it had accelerated the receipt of orders to be able to sell more merchandise in areas of the country where school resumes earlier.

Macy's also got help from its Bloomingdale's chain, where sales rebounded after signs of weakness in the spring.

Macy's reported net income of $281 million, or 72 cents a share for the quarter that ended Aug. 3, up slightly from $279 million, or 67 cents per share a year earlier. That was 6 cents per share less than expected, according to Thomson Reuters I/B/E/S.

The retailer resorted to slashing prices to clear unsold merchandise and lowered its profit forecast for the year. It now expects earnings of between $3.80 and $3.90 per share, compared with a previous range of $3.90 to $3.95.

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