Shares of Macy’s Inc. are tanking in Wednesday morning trading after the retailer posted second-quarter earnings that fell well below analysts’ expectations.
The department store chain reported adjusted earnings of 28 cents per share on profits of $86 million — a wide difference from the 45 cents a share forecasted by Wall Street. Revenues during the period also slightly missed the mark — with Macy’s logging $5.546 billion, versus the predicted $5.55 billion. Same-store sales, meanwhile, were up 0.3%, also short of consensus bets of a 0.4% gain.
The news sent Macy’s stock down more than 17% to $16.04 at the opening bell.
In an accompanying statement, chairman and CEO Jeff Gennette attributed the hit to an increase in markdowns as the retailer sought to clear unsold products during the spring season.
“Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm-weather apparel and the accelerated decline in international tourism,” he said. “We took markdowns to clear the excess spring inventory and are entering the fall season with the right inventory to meet anticipated customer demand.”
Macy’s also lowered its guidance for the full year: Earnings expectations are now in the range of $2.85 to $3.05 per share, compared with a prior forecast of $3.05 to $3.25 per share, while sales are predicted to remain flat.
“While we had seasonal inventory challenges in spring, there are many areas of the business that are performing well, notably our destination businesses,” Gennette said. “We continue to see healthier sales within our brick-and-mortar business, led by our Growth50 stores and Backstage expansion. Our digital business posted its 40th consecutive quarter of double-digit growth, and mobile remained our fastest-growing channel.”
Outlined last February, the Growth50 project is the retailer’s experiment to revamp 50 locations across the United States by modernizing interiors, expending offerings and increasing staffing levels, among other improvements. Its Backstage stores were introduced in 2015 and serve as the firm’s off-price concept, while the firm also rolled out its experiential bet, Story, in April.
Amid Macy’s dismal Q2 results, other department store stocks were also down in morning trading, with Target dropping more than 2% to $81.70, Kohl’s declining 9.5% to $45.84 and Nordstrom sliding nearly 10% to $26.23.
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