Macy's Q1 Earnings Beat, But Revenues Miss; Cuts Full Year Outlook

Macy's, Inc. M announcement of the first quarter results and the outlook dampened investor sentiment. The earnings beat in the first quarter wasn't enough to arrest the negative sentiments surrounded by its revenue miss and the slashing of the forecast for the full year. The two factors were good enough for bears to have a firm grip in the pre-market trading, dragging the stock more than 7 percent.

Macy's reported 40.4 percent drop in net income to $115 million from $193 million while earnings fell 34 percent to $0.37 a share from $0.56 a share in the year-ago quarter. Excluding any adjustments, it would have earned $0.40 a share, which meant that the earnings topped the Street analysts' expectations by $0.04 a share.

The company's sales totaled $5.771 billion, compared with sales of $6.232 billion in the same period of the preceding year thus representing a fall of 7.4 percent. The chain of retailer blamed the year-over-year drop in total sales partly to the closure of the 41 stores in 2015. Its comparable sales on an owned plus licensed basis witnessed a fall of 5.6 percent in the first quarter. On an owned basis, its comparable sales fell 6.1 percent.

The retailer's Chairman and CEO, Terry Lundgren, commented, "We are seeing continued weakness in consumer spending levels for apparel and related categories. In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook. Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy's and Bloomingdale's are key destinations, as well as a slowdown in some center core categories – further intensifying the challenges associated with growing topline sales revenue."

He continued, "Given that the first quarter is a relatively small portion of the total year, we have an opportunity to make up some ground in the months ahead, and particularly in the fourth quarter. But as a result of these factors, we believe it is prudent to reduce our sales and earnings guidance for the 2016 fiscal year."

Lundgren added, "Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term. We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value. We will continue to be guided by our M.O.M. strategies (My Macy's personalization, Omni Choices, making Magic Connections with customers), which we believe resonate with our customers and remain a powerful formula for future success."

Going forward, Macy's said its top line were continued to remain below its initial predictions. As a result, the retailer was forced to revise its earnings forecast downwards for the full year 2016. Accordingly, it reduced its earnings guidance to $3.15 to $3.40 a share from $3.80 to $3.90 a share projected earlier for the same period. Analysts' expect the company to report earnings of $3.80 a share.

On Wednesday, the stock traded 7.4 percent down in pre-market trading.

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Posted In: EarningsNewsGuidance
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