Macy's racks up loss as sales decline 45%; L Brands, TJX,
Kohl's, Best Buy feel the pain
By Suzanne Kapner
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 22, 2020).
The coronavirus pandemic is widening the divide between
retailers that are drawing shoppers and those that are losing
business, accelerating a split that had been playing out before the
health crisis forced some chains to temporarily close stores.
Department stores and apparel retailers are feeling the most
pain. Their stores were closed from mid-March through April, and
while some buying shifted online, it wasn't enough to offset the
lost sales in physical locations.
On Thursday, Macy's Inc. offered a glimpse of the damage wrought
by the virus, saying that first-quarter sales fell by as much as
45% and that it expects to record a roughly $1 billion operating
loss when it reports financial results July 1.
Victoria's Secret parent L Brands Inc. said quarterly sales fell
37% and that it would close about a quarter of the lingerie brand's
stores in North America. Kohl's Corp. reported a 41% drop in sales
for the spring quarter, while nearly $5 billion in sales
disappeared at off-price retailer TJX Cos.
Unlike the clothing sellers, electronics chain Best Buy Co. was
able to make up for closed stores with online orders and curbside
pickup. The chain, which also now has about 700 stores offering
in-store visits by appointment, reported a 6% drop in quarterly
revenue.
Best Buy was "able to retain approximately 81% of last year's
sales during the last six weeks of the quarter" even though
customers couldn't enter stores, Chief Executive Corie Barry said
Thursday.
Macy's closed all of its roughly 775 stores March 18. It began
reopening locations May 4, and Chief Executive Jeff Gennette said
early results are encouraging. The company expects to have all its
stores reopened in some capacity over the next month.
Mr. Gennette said its Herald Square flagship in New York City
could begin offering curbside pick up in several weeks. But Macy's
also said it is re-evaluating its store strategy, which could
eventually lead to more closures beyond the 125 locations it
previously planned to shut over the next three years.
Mr. Gennette said he initially expected sales would be down 80%
from year-ago levels in reopened stores, but they are down about
50%. "We expect a gradual recovery but are encouraged by these
early results," he said in a webcast conversation with J.P. Morgan
analyst Matthew Boss.
Retail executives and analysts said the fallout from the
pandemic is likely to be felt even as life starts to return to
normal, with more states loosening restrictions and allowing
businesses to reopen.
"We will be in a fairly unprecedented period of change for some
time," Kohl's CEO Michelle Gass said. The retailer has reopened
about half of its more than 1,100 stores, but shoppers are coming
back slowly. Ms. Gass said sales at the reopened stores are about
half to a third of normal.
"As it relates to the balance of the year, we are planning the
business very conservatively," Ms. Gass said.
Off-price chain TJX, which reported a 52% dive in first-quarter
revenue after temporarily closing its stores and websites, said it
had seen strong demand after reopening some stores this month. "We
have been encouraged with the very strong sales we have seen with
our initial reopenings," CEO Ernie Herrman said.
The owner of T.J. Maxx, Marshalls and HomeGoods, has reopened
about 1,600 of its roughly 4,500 stores world-wide. Initial sales
have been above last year's for the roughly 1,100 stores reopened
for at least a week, it said.
Mr. Herrman said the company has been hitting its e-commerce
capacity limits after a few hours each morning. He said that unlike
other chains that are shifting more into e-commerce as the pandemic
zaps sales in physical stores, TJX has no plans to rely on digital
sales to get it through the crisis.
There is a deluge of excess goods available, Mr. Herrman said,
ensuring that TJX will have access to plenty of discounted
merchandise to offer its customers. For the first quarter, TJX
booked an $877 million net loss, including a $500 million charge
for unsold inventory.
For the spring quarter, Macy's expects to swing to an operating
loss between $905 million and $1.1 billion, compared with a profit
of $203 million a year ago. Contributing to the loss was a $300
million write- down on unsold inventory, executives said. Kohl's
swung to a $541 million net loss in the first quarter, while L
Brands booked a nearly $300 million net loss.
By contrast, big-box chains such as Walmart Inc., Target Corp.,
Home Depot Inc. and Lowe's Cos., whose stores remained opened,
experienced a sales surge, as shoppers flocked to them for food,
items for the home and other essentials.
"The big-box chains are winning new customers that will stick
around after the pandemic," Citi analyst Paul Lejuez said.
Mr. Lejuez recently surveyed 1,000 J.C. Penney Co. customers and
asked where they would shop if their local Penney closed. Roughly a
third of respondents said they would shop at Target and another
third said they would visit Walmart.
Penney filed for bankruptcy protection this month and plans to
close about 240 stores, or nearly 30% of its locations. Neiman
Marcus Group and J.Crew Group Inc. also filed for bankruptcy this
month, along with department-store chain Stage Stores Inc., as the
pandemic tipped retailers already in a weakened financial state
over the edge.
Other chains are expected to close tens of thousands of stores
in coming years as more sales shift online. Just this week, Pier 1
Imports Inc. said it would wind down its operations and permanently
close its 540 remaining stores after it can liquidate the
inventory. The furniture and housewares seller filed for bankruptcy
in February.
L Brands said Wednesday that it would close about 250 Victoria's
Secret and Pink stores in North America this year, or a quarter of
the lingerie seller's locations in the region. The company is
reeling after plans to sell a controlling stake in Victoria's
Secret to a private-equity firm were scuttled by the pandemic.
Neil Saunders, managing director of research firm GlobalData
Retail, said it isn't just health concerns that will dissuade
shoppers from rushing back to stores for nonessential purchases,
but also their pocketbooks at a time of record unemployment. More
than 36 million workers, or roughly a fifth of the U.S. workforce,
have filed for unemployment insurance since March 14.
"Even among those who are going out to shop, there has been
financial distress," Mr. Saunders said. "People don't feel
comfortable spending freely."
Macy's Chief Financial Officer Paula Price said the company is
seeing credit card delinquencies rise due to unemployment.
Micah Maidenberg contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
May 22, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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