- Prachi Singh |
Macy's reported earnings per share of 36 cents in the third quarter of 2015, ended October 31, 2015. Excluding asset impairment charges of 111 million dollars, or 20 cents per share, primarily related to the previously-announced plans to close 35 to 40 stores in early 2016, third quarter earnings per share were 56 cents per share. This compares with 61 cents per diluted share in the third quarter of 2014.
Macy's has also announced an agreement with Luxottica Group to open licensed LensCrafters departments in as many as 500 Macy's stores.
“We are disappointed that the pace of sales did not improve in the third quarter, as we had expected. Spending by domestic customers remained tepid, especially in key apparel and accessory categories. Simultaneously, the slowdown in buying by international visitors continued to significantly impact Macy's and Bloomingdale's stores in tourist centers, which are some of our company's largest-volume and most profitable locations,” said Terry J. Lundgren, chairman and chief executive officer of Macy's.
Third quarter sales highlights
Sales in the third quarter totaled 5.874 billion dollars, a decrease of 5.2 percent, compared with sales of 6.195 billion dollars in the same period last year. Comparable sales on an owned plus licensed basis were down by 3.6 percent in the third quarter. On an owned basis, third quarter comparable sales declined by 3.9 percent.
For the year to date, Macy's sales totaled 18.210 billion dollars, down 2.8 percent from total sales of 18.741 billion dollars in the first three quarters of 2014. Comparable sales on an owned plus licensed basis were down by 1.7 percent year-to-date and on an owned basis, comparable sales declined by 2.2 percent.
In the third quarter, the company opened a new Macy's store in Ponce, PR, five Macy's Backstage stores in metro New York City, and 10 new Bluemercury freestanding specialty stores. The company closed Macy's stores in Bedford, NH, and Owings Mills, MD. In the fourth quarter, scheduled store openings include a full-line Bloomingdale's in Honolulu, three Bloomingdale's Outlets, and one Macy's Backstage. A Macy's store in Los Angeles, is scheduled to close in the fourth quarter of 2015 in preparation for a new store to be built in the same mall.
Key strategies for future growth
Macy's is continuing to execute a number of key strategies and actions going forward to adapt its business model as an omnichannel retailer committed to outstanding stores as a competitive differentiator. Part of Macy's MOM strategies (My Macy's localization, Omnichannel and Magic Selling customer engagement) include accelerating investments in Macy's, Bloomingdale's and Bluemercury's digital and mobile capabilities to mirror the shift to increased online shopping, where the company continues to see double-digit, year-over-year sales increases.
The company is also concentrating its resources in top stores in the best locations so each store is a more compelling magnet for customer activity and uses its selling space more productively. Best stores will see intensified merchandise assortments in key destination departments such as jewelry and watches, Meanwhile, in early 2016, the company will be closing 35 to 40 of its current portfolio of about 800 Macy's and Bloomingdale's stores, and expects it will continue to reduce the number of stores over time.
Macy’s also plans to expand Macy's Backstage and over the next two years, the company will roll out about 50 free-standing Macy's Backstage stores in off-mall locations, building on the pilot launch this fall. In addition, in spring 2016 the company will pilot Backstage stores within up to 10 existing Macy's store locations, creating a new hybrid store that offers the latest fashions, outstanding service and major brands.
The company will open approximately 40 additional Bluemercury self-standing beauty specialty stores (bringing the total store base to approximately 115 by the end of 2017), while also integrating Bluemercury shops into the beauty departments of Macy's stores. The company will expand Macy's internationally based on the learnings it expects from the Macy's China Limited pilot with Alibaba's Tmall Global beginning in the fourth quarter.
Revises FY15 guidance
The company has revised its 2015 guidance. Earnings per diluted share for the full-year 2015 now are expected in the range of 4.20 dollars to 4.30 dollars, excluding asset impairment charges associated primarily with previously announced store closings. This compares with previous guidance in the range of 4.70 dollars to 4.80 dollars. Updated annual guidance calculates to guidance for fourth quarter earnings of 2.54 dollars to 2.64 dollars per diluted share.
Comparable sales on an owned plus licensed basis for the full year are expected to decrease by 1.8 percent to 2.2 percent, compared with previous guidance of approximately flat. This calculates to fourth quarter comparable sales on an owned plus licensed basis to decline by 2 percent to 3 percent. Full-year and fourth quarter 2015 comparable sales on an owned basis will be approximately 50 basis points lower than on an owned plus licensed basis. The company expects 2015 total sales to be down by 2.7 percent to 3.1 percent, compared to previous guidance for total sales to be down approximately 1 percent.