Macy's and Kohl's Slow Sales Slump, but Investors Still Spooked -- 2nd Update
August 10 2017 - 1:15PM
Dow Jones News
By Suzanne Kapner and Ezequiel Minaya
Macy's Inc. and Kohl's Corp. reported another quarter of
shrinking sales that spooked investors, though the latest declines
weren't as deep as they have been in recent quarters.
Kohl's executives pointed to signs of improved demand and
shopper traffic in summer months and Macy's executives said their
store restructuring and inventory reduction put them on track to
reach their goals for the year.
"I don't want to make too much of one quarter, but it certainly
feels better than it has in a long time," Karen Hoguet, Macy's
finance chief, said in an interview.
Still, the results weren't enough for investors who have soured
on the sector. Shares of Macy's fell 9% and Kohl's dropped 7%
Thursday afternoon. Smaller department store chain Dillard's Inc.,
which Thursday surprised analysts by swinging to a loss, tumbled
15%.
"Investors want more sustainable evidence of why these
businesses can survive in today's world," said Charles Grom, an
analyst with Gordon Haskett Research Advisors.
Macy's same-store sales -- a metric that tracks sales at
established locations that haven't recently opened or closed --
fell 2.8% in the second quarter, better than the 5.2% retreat in
the first quarter.
"I'm encouraged by the second quarter and we're on track for the
year," Macy's CEO Jeffrey Gennette said on a conference call. "But
I also know that we operate in an environment of intense and
destructive competition, and that our customer has more shopping
options than ever."
Kohl's same-store sales retreated 0.4% in its latest quarter,
less than the 2.7% decline the previous quarter.
"The improvement in our sales trend was driven entirely by an
improvement in traffic," Kohl's Chief Executive Kevin Mansell said
on a conference call. A notable change came in July, when traffic
turned positive compared with the same month last year.
Kohl's lured new shoppers with the addition of the Under Armour
brand in its stores. That helped its activewear business post a
roughly 15% sales increase in the period compared with a year ago.
Mr. Mansell said Kohl's also sold more goods at full price, while
less inventory resulted in fewer promotions to clear unsold
goods.
Foot traffic has steadily slowed at brick-and-mortar stores as
shoppers increasingly turn to Amazon.com Inc. and e-commerce to
spend their dollars. Same-store sales have declined at both Macy's
and Kohl's for several quarters in a row.
But Craig Johnson, the president of market research firm
Customer Growth Partners, said the worst may be over for some of
the stronger department stores. "Although it's premature to call a
turn, we believe that the sector has bottomed," Mr. Johnson said,
noting that mall traffic picked up in July just in time for the
back-to-school sell season.
Both Macy's and Kohl's said the back-to-school season was off to
a strong start.
Stave Lewkovitch, 36, an accountant from Manhattan, was in the
Herald Square Macy's Thursday shopping for maternity clothes. Ms.
Lewkovitch said she buys most things online -- from toys to clothes
for herself and her children -- but she prefers to try on maternity
clothes. Ms. Lewkovitch said she looks for sales and clips coupons
because "everything goes up, but salaries stay the same."
The shift to online shopping has pinched Macy's and its peers,
which have responded by closing weaker locations and investing in
e-commerce. Macy's, which is in the process of closing 100 stores,
said Thursday it expects same-store sales to decline about 2.5% in
the third quarter.
Macy's said business improved throughout the second quarter,
despite a 9% drop in sales to foreign tourists. New strategies,
including revamped shoe and jewelry departments, contributed $60
million in sales during the period.
Kohl's CEO Mr. Mansell said he had no plans to announce mass
store closures this year. "There is an impact on a market when you
have fewer stores," he said, noting that e-commerce sales tend to
slow in areas where stores have closed. "Everything we've learned
reinforces the importance of a great physical footprint."
Kohl's is opening smaller stores, including four new locations
this fall, and is working to tailor stores to their local
communities using data that identifies what shoppers in those areas
want.
Dillard's slowed its same-stores sales decline to a 1% retreat
in its second quarter, better than the 4% in the first three months
of the year. But the company swung to a loss as it cut prices to
help clear bloated inventory.
Overall for the quarter ended in July, Macy's earned $116
million, up from $11 million a year ago. Revenue decreased 5.4% to
$5.55 billion. Kohl's posted $208 million profit, up from $140
million a year ago. The company's revenue slipped 0.9%% to $4.14
billion.
Michelle Ma contributed to this article
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Ezequiel
Minaya at ezequiel.minaya@wsj.com
(END) Dow Jones Newswires
August 10, 2017 13:00 ET (17:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Macys (NYSE:M)
Historical Stock Chart
From Aug 2024 to Sep 2024
Macys (NYSE:M)
Historical Stock Chart
From Sep 2023 to Sep 2024