Three weeks after revealing it would close 125 of its 680+ stores as part implementing its “Polaris” strategy, Macy’s reported Q4 earnings that beat Wall Street expectations but also revealed many of the company’s continued problems. Earnings per share ($2.12) and net sales ($8.34 billion) topped initial Refinitiv estimates of $1.96 per share and $8.32 billion, respectively, but net income fell 55% to $340 million and same-store sales dipped 0.5%.
The same-store sales decrease looks even worse since it occurred during the holiday season, and represented a major drop-off from the 0.7% growth experienced in Q4 2018. Macy’s already had reported that its November and December comparable store sales fell 0.6%.
Traffic to stores slowed significantly throughout the quarter, with Macy’s having 13% fewer visitors in Q4 2019 compared to Q4 2018, according to data from Cuebiq.
With the holiday in the rear-view mirror, Macy’s reiterated the annual profit forecast that it provided to analysts earlier this month. The department store is projecting full-year net sales of $23.6 billion to $23.9 billion, and a drop in same-store sales on an owned plus licensed basis of 2.5% to 1.5%. Annual adjusted earnings per share are forecast by Macy’s to fall within a range of $2.45 to $2.65.
The department store anticipates generating approximately $1.5 billion in annual savings from the store closures along with nearly 2,000 job cuts, which the company says will be fully realized by the end of fiscal 2022. The funds will be partially reinvested into growth initiatives such as the off-price Backstage banner or the new small-format concept shop, The Market by Macy’s.
During the earnings call, Macy’s CEO Jeff Gennette indicated that the coronavirus outbreak has had a minor effect on the company to start 2020, with the retailer experiencing a slowdown of products coming out of China.
Macy’s manufactures 50% of its private label goods in China, so the outbreak may have a “small impact on sales,” Gennette said. Despite the slowdown, or the fact that he wants private label sales to drive 25% of total revenue by 2025, Gennette noted there is “nothing concerning yet, and we’re watching this one very, very carefully.”