Macy’s Q1 earnings and sales decline

Macy's first quarter 2016 earnings were 37 cents per diluted share compared with 56 cents per diluted share in the first quarter of 2015. Sales totalled 5.771 billion dollars, a decrease of 7.4 percent, compared with sales of 6.232 billion dollars in the same period last year.

“We are seeing continued weakness in consumer spending levels for apparel and related categories. In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook. Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy's and Bloomingdale's are key destinations, as well as a slowdown in some center core categories - further intensifying the challenges associated with growing topline sales revenue,” said Terry J. Lundgren, Macy's Chairman and CEO.

Store closures impact sales in Q1

The company said, year-over-year decline in total sales reflects, in part, the 41 stores closed in 2015. Comparable sales on an owned plus licensed basis were down by 5.6 percent in the first quarter. On an owned basis, comparable sales declined by 6.1 percent.

In the first quarter, seven new freestanding Bluemercury beauty specialty stores were opened, and a Macy's jewellery specialty store was closed in Honolulu, HI, with the business transferred into the full-line Macy's store in the same mall.

Macy's operating income totalled 276 million dollars or 4.8 percent of sales for the first quarter, compared to 409 million dollars or 6.6 percent of sales for the same period in 2015. Macy's, board of directors has authorised an increase in the quarterly dividend on Macy's common stock to 37.75 cents per share from the current 36 cents per share. This represents the sixth increase in the dividend in the past five years.

Outlook bleak, comparable sales expected to decline

Macy's now expects full-year comparable sales on an owned plus licensed basis to decrease in the range of 3 percent to 4 percent, with comparable sales on an owned basis to be approximately 50 basis points lower. This compares with previous guidance for comparable sales on an owned plus licensed basis to decline by approximately 1 percent in fiscal 2016.

With top-line sales expected to remain below our initial expectations, the company has revised its guidance for earnings per diluted share excluding settlement charges in fiscal 2016 to a range of 3.15 dollars to 3.40 dollars. This compares with previous guidance of 3.80 dollars to 3.90 dollars per diluted share in 2016.

In fiscal 2016, while Macy's continues to review its store portfolio, the company expects to open a new Macy's store in Kapolei, HI, as well as approximately 42 additional Bluemercury locations including 24 freestanding and 18 inside Macy's, 16 Macy's Backstage locations including one freestanding and 15 inside Macy's and a Bloomingdale's outlet store in Orange, CA. Announced new stores in future years include Macy's in Murray, UT , a Macy's replacement store in Los Angeles, and Bloomingdale's in San Jose and Norwalk. In addition, a new Bloomingdale's store is expected to open in 2017 in Kuwait, and new Macy's and Bloomingdale's stores are planned to open in Abu Dhabi, United Arab Emirates, in 2018 under license agreements with Al Tayer Group.

picture:macys.com