When the well-known department store in the U.S., Macy’s Inc. (M, Financial), posted its first quarter numbers on May 13, it did little to excite the analysts following its stock as the earnings failed to meet the expectations. In fact, the performance was dim compared to the same quarter of the previous fiscal year. That was well reflected in the stock movement that slipped about 2.04% in early Wednesday trading. Though the management has cited several challenges during the quarter which they deemed were responsible for the lower than expected earnings of the departmental store, analysts were not convinced with the performance of the first quarter. Let’s quickly take a sneak peek into the quarter highlights.
The bleak number mix
The dim performance of Macy’s disappointed analysts worldwide as both its top and bottom line failed to meet the Street expectations. Revenue for the quarter was about 0.7% down year-over-year from $6.28 billion reported in the year-ago quarter to $6.23 billion, which missed the $6.3 billion Wall Street estimate.
Net income for the quarter stood at $193 million, or $0.56 a share, down from $224 million, or $0.60 per share, reported in the year-ago similar quarter. In fact, the earnings missed the analysts’ consensus by about $0.05 a share.
The three major factors which were highlighted to be the factors responsible for such a bleak quarter were the West Coast port shipments delay, bad winter weather which kept many shoppers from visiting Macy’s stores and the strong dollar which reduced the spending ability of international tourists visiting Macy’s stores. Same-store sales, on an owned basis, plunged 0.7% during the quarter.
Terry J. Lundgren, CEO of Macy’s stated – “Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels. Moreover, sales were negatively affected by lower levels of spending by international tourists visiting major U.S. cities with flagship Macy’s and Bloomingdale’s stores, including New York City, Chicago, Las Vegas and San Francisco…”
Growth factors
Though the quarter was a bad one for Macy’s, Lundgren has cited that there are some projects at hand that could aid in driving same store sales for the company going forward. This autumn, the company is planning the launch of four off-price outlets in New York, thereby joining the league of discounters in the U.S. These off-price stores would be called Macy’s Backstage that would sell the clearance products from the chain’s full-price stores.
It is usually seen that products sell easily at discounted prices than at full-price, but some analysts are worried that this venture might cannibalize the sales from Macy’s mainstay department stores.
Besides opening such new stores, Macy is also trying to create a stronger hold on beauty products and has acquired the beauty and spa chain Bluemercury for $210 million this year in February for achieving this ambition of bringing Bluemercury boutiques and products to its department stores, thereby luring more beauty conscious customers to its conventional stores.
Hence, Lundgren has concluded that there are still many reasons that could aid in growing the business in the presence of headwinds such as a strong dollar.
A trial to appease investors
Though the first quarter was not a promising one, Macy’s announced that it would be improving its dividend payout by 15% to $0.36 a share from $0.3125 per share. This was a step to appease the worried investors. The company has stated that this dividend hike would be payable on July 1 to shareholders of record at the close of business on June 15 this year.
The company stated that it has improved the share repurchase program by $1.5 billion, which now brings the total outstanding authorization to about $2.1 billion.
Last word
Though Macy’s first quarter numbers were rather bleaker than expected, the management remains upbeat on the future earnings and are taking strategies to drive the sales in the northward direction going ahead. Let’s stay tuned and keep watching!
