The stock fell more than 17% after the company lowered its full-year earnings guidance.
Going into Macy’s second-quarter earnings report, investors didn’t have high hopes. The stock was already down 30% and retail department stores have been struggling with declining sales for a while.
Unfortunately, these low expectations turned out to be correct. On Wednesday, the company reported heavy losses and lowered its guidance for the rest of the year. Here is an overview of the earnings report:
- Revenue: $5.546 billion as opposed to $5.542 expected
- Earnings: 28 cents per share as opposed to 45 cents per share expected
- Same-store sales: Up 0.3% as opposed to 0.4% expected
What happened during the second quarter?
The company’s shares fell more than 17% upon the news, bringing the stock to a new 52-week low. Macy hasn’t seen its shares fall this far since 2009.
Increasingly, consumers are buying clothes and accessories online instead of going to the mall or department stores. Macy’s is trying to adapt to shifting consumer preferences by updating its app and customer loyalty program but its efforts continue to fall short.
According to CEO Jeff Gennette, many of the company’s second-quarter misses were due to inventory problems. Items from Macy’s swimwear and warm weather apparel didn’t sell as well as expected.
The company was forced to markdown the spring and summer items to make room for fall selections. This caused the company’s net income to reach $86 million, which is down from $166 million a year earlier.
Online and in-store sales were up 0.3% but this still fell short of expectations. The company’s net sales did exceed investor expectations but only by a little bit.
And unfortunately, the problem doesn’t end with Macy’s because department stores are struggling across the board. After Macy’s income report was released, shares of Kohl’s and Nordstrom fell by 10% and shares of JCPenney fell by 5%.
Macy’s does continue to make progress but these efforts may not be enough. The company’s sales continue to fall short and the stock is down more than 60% from a year earlier.