Macy’s stock fell as much as 15% on Nov. 11 after reporting a 5.2% sales decline to $5.87 billion in Q3. The sales total trailed the $6.1 billion projections from Wall Street analysts, and marked the biggest decline since Q2 2010. To date, Macy’s stock has lost 43.54% of its value since its 2015 peak on July 17.
As a result of the sales decline, the retailer changed its outlook for the 2015 fiscal year. Macy’s now expects 2015 comparable stores sales to dip approximately 1.8% to 2.2%, a drastic change from the initial guidance that indicated that comparable sales would remain flat.
“We are disappointed that the pace of sales did not improve in the third quarter, as we had expected,” said Terry J. Lundgren, Chairman and CEO of Macy’s. “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.”
In an interview with Bloomberg, Lundgren indicated that the slowdown brings in concerns that consumers are shifting away from mall shopping, and instead are narrowing their focus to items department stores don’t sell.
“It’s obviously troubling,” Lundgren said in the interview. “My sense is, if they want to spend, they can. And once they’ve finished buying their cars and finished remodeling their houses, there’s room for them to spend in our categories as time goes on.”
It appears the quarterly results are affecting Macy’s store operations, with the retailer planning to close between 35 and 40 of its namesake brand stores early in 2016. The stores that will close generated approximately 1% of company sales, or $300 million, in 2014. However, they represent approximately 5% of the brand’s stores, illustrating the poor revenue generated from these stores.
Macy’s To Introduce More Store Formats
While Macy’s is downsizing its namesake brand, the earnings report indicated that the retailer is adding new elements to a collection of its store locations. For example, the retailer is partnering with Luxottica Group to open LensCrafters shops to as many as 500 U.S. Macy’s department stores over the next three years.
The retailer is expanding its off-price Macy’s Backstage store format, set to roll out 50 free-standing Macy’s Backstage stores in off-mall locations in the next two years. In addition, Macy’s will bring the Backstage store concept to as many as 10 existing Macy’s store locations,
Macy’s will also open approximately 40 Bluemercury brand stores by 2017, bringing the total store base to approximately 115. The retailer intends to also integrate its Bluemercury shops into the beauty departments of Macy’s stores.