Macy's Reports Same-Store Sales Decline And Data Breach

Popular retail giant's stock is down and is one of the worst performing name in the S&P 500, with its stock down being slashed 46% this year. As this wasn't enough, in a serious data breach, popular US retail giant Macy's Inc M has admitted that cyberthieves stole customers' credit card numbers, verification codes and expiry dates by inserting malicious code on its website. And on top of all that, the Cincinnati-based retailer reported its first same-store sales decline in two years. Consequently, the company slashed its full-year outlook.

Data Breach

The security data breach took place between October 7 and October 15 and according to TechCrunch, private information of thousands of consumers is compromised. Macy, however claims that only a small percentage of its customers were affected by this hacking intrusion and that it already introduced counter measures as they notified customers last week through letter-form. But this is not the first-time hackers are targeting Macy's. Thousands of online customers were also compromised in another incident last year, so there will be quite a bit of damage control ahead to restore the confidence of its online users.

Quarter Earnings

Revenue for the third quarter fell to $5.17 billion from $5.40 billion in the same quarter last year, whereas analysts expected $5.32 billion, according to Refinitiv. But earnings per share were 7 cents which is more than 0 cents expected, so there's a somewhat mixed picture of the third quarter earnings report.

CEO explained that weaker sales were results of a warmer fall and weaker spending by tourists. And just like its industry peers, the company also experienced issues with its website. What is most worrying is that net income fell from $62 million in last year's comparable quarter to $2 million in the most recent quarter that ended on November 2. So, things are not looking up despite the holiday season around the corner, there are also tariffs to think of.

Competitors

The Gap Inc GPS is also likely also announce weak third-quarter sales and full-year outlook when it releases results after the market close as the company also slashed its full-year adjusted earnings guidance due to macroeconomic headwinds impacting the entire industry.

While JW Nordstrom Inc JWN is facing the same storm as its department store peers, analyst expect more positivity in their results due to the company's digital strategy.

But investors will be looking into a new women's store New York City that opened on October 24, that was labelled by management as the "largest single-project investment in Nordstrom history". Wall Street also finds that Nordstrom Rack could help to offset some of the weakness as the competing company's shares have also tumbled 24% this year. Target Corporation TGT definitely is the bright spot of retail with its most recent quarter results confirming its 2019 outperformer retail status. Its shares are up 90% since the beginning of the year, outperforming even TJX TJX and the constantly evolving Walmart Inc WMT which also admitted it has more work to do with its online business.

Outlook

Macy's previously raised prices of certain products such as luggage and houseware but quickly realised consumers were not drawn. Some of its efforts to keep its offerings fresh even ended up being an inventory build-up which remains a ‘core challenge' for the company. The retailer also tried updating its mobile app and loyalty program, but without any positive result so far as shares dropped almost 50% this year.

Therefore, getting to know their customers better and protecting their information seems to be one of the first steps to take. Macy's can only expect increased pressure from its competitors as more brands are shifting away in order to establish a direct channel to their customers.

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