Macy's Cuts Guidance as Sales, Profit Slide

By Chelsey Dulaney 

Macy's Inc. on Wednesday cut its sales guidance for the year after reporting steeper-than-expected slides in sales and profit in its second quarter.

Chief Executive Terry J. Lundgren said the company was disappointed with its second-quarter results, but said Macy's expects improvement in the second half of the year.

Still, 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 in the company fell 2% to $66.20 a share in premarket 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 advisors 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 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. The company has been hurt recently by trouble at West Coast ports and lower spending by tourists. 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 [e-mail]

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