Macy’s Inc.’s shrinking store count has paid off in better-than-expected fourth-quarter earnings posted by the firm today.
While the department store chain’s net income slid 13 percent year-over-year, to $475 million, or $1.54 per diluted share, adjusted diluted earnings per share — at $2.02 — topped analysts’ bets for diluted EPS of $1.96.
Net sales, on the other hand, declined 4 percent year-over-year, to $8.5 billion, missing forecasts for sales of $8.6 billion. Comparable store sales also declined 2.7 percent.
During the past year, Macy’s has initiated several strategies — including 100 store closures, more than 10,000 layoffs and a plan to double down on its digital efforts — aimed at getting the beleaguered chain back on track. (Macy’s said it closed 66 stores in 2016 and will close another 34 over the next several years.)
Macy’s chairman and CEO Terry Lundgren said today that those efforts are starting to pay off for the company.
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“While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” Lundgren said. “These include continued improvement in our digital platforms, the rollout of our new approach to fine jewelry and women’s shoes, an increase in exclusive merchandise and the refinement of our clearance and off-price strategy.”
He added: “We also took a big step forward in rightsizing our physical footprint and restructuring our entire organization. The combination of these initiatives will help us gain market share, return to growth and drive enhanced value for our shareholders over time.” (The company also said today that Lundgren, who announced his retirement last June, will step down on March 23. Macy’s president Jeff Gennette will assume the CEO role and Lundgren will continue as executive chairman.)
Full-year revenues fell to $25.8 billion, down 4.8 percent from the previous year, while net income tumbled 42 percent, to $619 million, or $1.99 per diluted share. Adjusted full-year EPS dropped 18 percent from the prior year, to $3.11.
Lundgren said that the company is making ongoing investments around speed as it seeks to navigate a challenging retail environment.
“We will be investing for the future in 2017,” Lundgren added. “Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster.”
Looking ahead, Macy’s predicts more declines in its sales and profit. The company called for comparable sales on an owned basis to decline between 2.2 and 3.3 percent, with comparable sales on an owned plus licensed basis declining between 2 and 3 percent. Total sales are expected to be down between 3.2 and 4.3 percent, reflecting the 66 stores closed in 2016. Adjusted diluted EPS are expected to land between $3.37 and $3.62, while adjusted diluted EPS are predicted in the range of $2.90 to $3.15.
As of 10:55 a.m. ET, Macy’s shares were up 1.4 percent, to $32.74.
Rumors that the company was on the selling block sent Macy’s shares climbing earlier this month when the New York Post reported that Lundgren is “open to offers from potential friendly buyers.”
Lundgren addressed those reports in an interview with CNBC today when he reportedly said that the firm would do the right thing for its shareholders.
“You’ve heard and talked about the rumors of somebody buying us, and you probably also heard we’re buying them,” Lundgren said. “We’re not going to be a highly leveraged retailer because those movies never turn out well. We’ve seen that before.”
