Shares of Macy's (M) are pulling back from their initial highs on Wednesday morning after the company posted a smaller than expected same-store sales decline for the crucial holiday period. The news came as the company prepares to close 29 stores and lay off workers as part of its annual review.
HOLIDAY PERIOD SALES: Macy's reported a decline in its holiday sales, but the drop was not as steep as many analysts had expected. In a statement, Macy's said its same-store sales fell 0.6% at its owned and licensed stores during November and December. At owned stores, same-store sales fell 0.7% during that period, it added.
"Macy’s performance during the holiday season reflected a strong trend improvement from the third quarter," Chief Executive Officer Jeff Gennette said in a statement. "Customers responded to our gifting assortment and marketing strategy, particularly in the 10 days before Christmas."
Macy's will hold an investor day on February 5.
STORE CLOSURES: Macy's has cut more than 70 workers at its Bloomingdale's chain and plans to announce larger layoffs in February, Women's Wear Daily's David Moin reported on Wednesday. The moves are said to be part of the retailer's restructuring plan. A spokeswoman confirmed to The Wall Street Journal that the retailer will close 28 Macy's stores and one Bloomingdale's store as part of a "normal" annual review of the company's store portfolio. Macy's currently operates about 680 department stores and 190 specialty stores.
WHAT'S NOTABLE: Macy's has been struggling in its turnaround efforts under CEO Jeff Gennette. Last year, Macy's CEO Jeff Gennette said he was "committed" to stabilizing its brick and mortar business, and that customers had been confused by "very complex" pricing. Gennette said the company would invest in what it dubbed "destination businesses," dresses, fine jewelry, men's tailored apparel, women's shoes, beauty, and "big ticket," with Macy's also announcing moves to roll out new concepts, including Backstage and Story. In September, Macy's said it sees opportunities to reduce "ineffective markdowns and to move towards more personalized, targeted promotions for each customer." After a weak third quarter report, Macy's lowered its outlook for fiscal 2019.
In addition to weak results, Macy's has also grappled with executive turnover. In December, President Hal Lawton left the company to become CEO of Tractor Supply (TSCO).
Macy's and other retailers like J.C. Penney (JCP) and Kohl's (KSS) have also been hurt with competition from fast-fashion retailers like H&M and TJ Maxx (TJX), as well as an increase in online shopping on Amazon.com (AMZN).
RECENT ANALYST COMMENTARY: On December 30, Morgan Stanley analyst Kimberly Greenberger said her checks on specialty retail and department stores' traffic showed that it decelerated to a decline of 10.7% year-over-year in the third week of December, leaving her to lower her estimate of the Q4 to-date result to down 7.4% year-over-year. Traffic appeared "solid" during her store checks at the end of December week four, but a tough comparison to last year in week five left her "overall cautious" on the traffic view for the month.
A week prior to Greenberger's note, Cleveland Research analyst Rusty Wilson said his checks on Macy's indicated that its owned comp growth in Q4-to-date looked "slightly better" than in Q3 and in line with consensus. He projected November/December comps to be down 2.5% and Q4 overall to be down 2.5%, which he noted was in line with consensus.
PRICE ACTION: In morning trading, shares of Macy's are trading up 1.3% to $17.88.
Macy's
+0.23 (+1.30%)
Tractor Supply
+1.49 (+1.65%)
JCP
+
Kohl's
-0.11 (-0.22%)
TJX
+0.57 (+0.93%)
Amazon.com
-0.005 (-0.00%)