Macy's to Trim Management Ranks as Sales Fall -- 2nd Update
February 26 2019 - 1:19PM
Dow Jones News
By Suzanne Kapner and Aisha Al-Muslim
Macy's Inc. signaled 2019 would be a challenging year,
predicting sales wouldn't grow at all and announcing another round
of cost cuts.
The Cincinnati-based retailer said Tuesday it would streamline
senior management as part of a plan to save $100 million a year.
Macy's chief executive Jeff Gennette said in an interview that the
restructuring would eliminate 100 jobs.
This is the sixth year in a row Macy's has announced a
restructuring in its year-end quarter. Last year's actions were
expected to save $300 million annually, which Citi analyst Paul
Lejuez said "may be a sign savings are getting harder to find."
Macy's net sales for the period ended Feb. 2 fell 2.5% to $8.46
billion. Analysts polled by Refinitiv had forecast net sales of
$8.45 billion.
Sales at stores open at least a year grew 0.4% for the fourth
quarter, less than the FactSet estimate of a 0.8% increase.
Including licensed departments, same-store sales rose 0.7%.
Comparable sales would have been up 2%, including licensed
departments, were it not for a calendar shift that resulted in one
less week this year, the company said.
While the retailer's reported sales and profits were above
analysts' expectations, the results were lower than Macy's internal
projections and illustrated how the holiday shopping season was
mixed for retailers.
The nation's largest retailer, Walmart Inc., reported strong
sales growth for its year-end quarter. But Home Depot Inc.'s sales
grew less than expected and the chain tamped down expectations for
this year. Commerce Department figures out earlier this month
showed December retail sales declined at their fastest pace since
2009.
"Things did slow down a little bit," said Mr. Gennette. The CEO
said he was trying to parse how much of the slowdown resulted from
broader pressures like the government shutdown versus problems
specific Macy's, such as a fire at a distribution center and
changes the retailer made to a key holiday promotion. Overall,
though, Mr. Genette said "the consumer is healthy."
Macy's has been investing in a group of stores it calls magnets,
upgrading lighting and fixtures, merchandise assortments and
technology, while trying to shrink other, less promising locations.
The company plans to expand its remodeling efforts to an additional
100 magnet stores this year, up from 50 last year.
Macy's also plans to focus on improving its supply chain and
inventory management. The retailer wants to double down on
categories where it already has a strong market share such as
dresses, fine jewelry, furniture, men's tailored clothes, women's
shoes and beauty.
Profit fell to $740 million from $1.35 billion a year earlier.
Adjusted earnings were $2.73 a share, above the $2.53 a share
analysts polled by Refinitiv had expected.
Mr. Gennette said that Macy's was exploring options for its
Herald Square flagship that could involve adding complementary uses
to the location. The company is circulating a plan to city
officials, and while Mr. Gennette said that "everything is on the
table," he stressed that Macy's would continue to operate in the
space.
He added that the pace of asset sales, such as the divestiture
of its Union Square store in San Francisco for $250 million, would
slow going forward. "We've cycled through some of the low-hanging
fruit," Mr. Gennette said.
The CEO said that when the company has cut costs in the past, it
looked to eliminate sales associates in stores, rather than senior
management. "We figured out how precious those sales associates
are," he said. In fact, Macy's has added sales associates to some
of its magnet stores, which has helped drive improvements at those
locations, the company has said in the past.
Macy's shares were largely unchanged in morning trading, up
0.45% to $24.47. The shares are down about 11% in the past
year.
For the current fiscal year, the company expects net sales to be
roughly flat. It expects comparable sales to be flat to up 1%.
Excluding settlement charges, impairment and other costs, the
company forecasts adjusted earnings per share of $3.05 to $3.25,
compared with analysts' estimates of $3.29 a share.
The retailer operates about 680 department stores under the
Macy's and Bloomingdale's names, and nearly 190 specialty stores
that include Bloomingdale's The Outlet, Bluemercury, Macy's
Backstage and Story.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Aisha
Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
February 26, 2019 13:04 ET (18:04 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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