Macy’s Inc. cut its full-year same-store sales forecast, after second-quarter sales failed to make up for weakness in the first quarter when harsh winter weather kept shoppers away.
Macy’s earnings for the quarter ended Aug. 2 also missed the average analyst estimate as the company discounted heavily to win business, squeezing gross margins.
The company said on Wednesday that margins would be flat to slightly down for the rest of the year.
Shares of the company, which also owns the high-end Bloomingdale’s chain, fell as much as 6 per cent.
“Many customers still are not feeling comfortable about spending more in an uncertain economic environment,” chief executive Terry Lundgren said in a statement.
U.S. retail sales unexpectedly stalled in July, data showed on Wednesday, pointing to some loss of momentum in the economy. The sales were the weakest since January.
Shares of Macy’s rivals Kohl’s Corp. and Nordstorm Inc. were down 1.8 per cent and 1.2 per cent, respectively.
Macy’s said it expects same-store sales to increase 1.5 per cent to 2 per cent for the full year. It had earlier forecast an increase of 2.5 per cent to 3 per cent.
The company, which has remodelled many stores, including its flagship Herald Square store in Manhattan, plans more promotions and discounts for the back-to-school season.
Weaker categories in the second quarter included women’s and men’s sportswear as well as non-athletic shoes, chief financial officer Karen Hoguet said on a conference call.
However, Hoguet said the back-to-school season had been “extremely strong” so far.
“Our juniors business, we really think now has turned around and has been terrific,” she said.
The company stuck to its full-year earnings forecast of $4.40 (U.S.) to $4.50 per share.
Analysts remained positive on Macy’s long-term prospects despite the disappointing quarter.
“Its focus on improving the merchandise assortment while enhancing the customer experience both in stores and online will likely continue to drive strong results,” Stifel Nicolaus analysts wrote in a research note.
At least four brokerages including Stifel reiterated their “buy” or equivalent ratings on the company’s stock.
Macy’s has spent nearly $2-billion on IT and e-commerce projects over the past five years and has won over customers with services such as in-store pickups for online orders and “ship-from-store.”
The ship-from-store service allows customers to order from another Macy’s store if the item is not available and have it sent to their home. This helps Macy’s keep a tight hold on inventories, especially at its smaller stores.
Same-store sales, which include sales at macys.com and bloomingdales.com, rose 3.4 per cent in the second quarter.
Profit rose to $292-million or 80 cents per share, from $281-million or 72 cents a year earlier.
Total sales rose 3.3 per cent to $6.27-billion, after declining about 2 per cent in each of the previous two quarters.
Analysts on average had expected earnings of 86 cents per share on revenue of $6.3-billion, according to Thomson Reuters I/B/E/S.
Macy’s shares were down 4.3 per cent at $57.15 in late morning trading.
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