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Macy’s FY16 earnings exceed outlook but sales drop 4.8 percent

By Prachi Singh

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Management

Macy's has said that its full year 2016, adjusted earnings were 3.11 dollars per diluted share, which exceeds the company's most recent guidance of 2.95 dollars to 3.10 dollars on the same basis. Sales in fiscal 2016 totalled 25.778 billion dollars, down 4.8 percent from total sales of 27.079 billion dollars in fiscal 2015.

"While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit. Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster. Additional initiatives that we believe will improve sales trends in 2017 include continued omnichannel improvements, an updated marketing strategy and a simplified pricing structure," said Terry J. Lundgren, Macy's chairman and chief executive officer in a media release.

Review of the fourth quarter and FY16 results

Sales in the fourth quarter of 2016 totaled 8.515 billion dollars, down 4 percent from total sales of 8.869 billion dollars in the fourth quarter of 2015. On an owned basis, comparable sales declined by 2.7 percent. Comparable sales on an owned plus licensed basis were down 2.1 percent.

Fiscal 2016 comparable sales on an owned basis declined by 3.5 percent and on an owned plus licensed basis, comparable sales declined by 2.9 percent.

In fiscal 2016, as previously announced by the company, Macy’s opened 27 stores and closed 66 stores. The company plans to close an additional approximately 34 stores over the next few years for a total of approximately 100 stores. New stores opened in fiscal 2016 included one Macy's store in Kapolei, HI, 24 Bluemercury freestanding stores, one Macy's Backstage freestanding store in San Antonio, TX, and one Bloomingdale's Outlet in Orange, CA.

Fourth quarter earnings per diluted share were 1.54 dollars. Excluding impairments, store closing, settlement charges and other costs of 247 million dollars (147 million dollars after tax or 48 cents per diluted share), Macy’s said, earnings per diluted share on an adjusted basis were 2.02 dollars for the fourth quarter of 2016. In 2015, fourth quarter earnings per diluted share were 1.73 dollars.

Jeff Gennette ro assume CEO’s role in March

The company also said that its previously announced CEO transition will occur on March 23, 2017. As noted in the company's June 23, 2016, announcement, Jeff Gennette, President of Macy's will assume the CEO role and Terry Lundgren will continue as executive chairman of the company.

In fiscal 2017, the company expects comparable sales on an owned basis to decline between 2.2 percent and 3.3 percent, with comparable sales on an owned plus licensed basis to decline between 2.0 percent and 3.0 percent. Total sales are expected to be down between 3.2 percent and 4.3 percent in fiscal 2017, reflecting the 66 stores closed in 2016.

Adjusted diluted earnings per share of between 3.37 dollars and 3.62 dollars are expected in 2017, excluding the impact of the anticipated settlement charges related to the company's defined benefit plans. Excluding the impact of the anticipated fourth quarter gain on the sale of the Union Square Men's building in San Francisco and the anticipated settlement charges related to the company's defined benefit plans, the company said, adjusted diluted earnings per share of 2.90 dollars to 3.15 dollars are expected in 2017.

Picture:Facebook/Macy's

Macy's