Macy’s Inc. can blame its own stores for the lackluster same-store sales results for the holiday shopping period, says Neil Saunders, GlobalData Retail’s managing director.
Macy’s M, -17.69% reported same-store sales growth on an owned basis of 0.7%, and a 1.1% same-store sales increase on an owned-plus-licensed basis.
The department store retailer now expects full-year same-store sales growth on an owned-plus-licensed basis of about 2%, down from previous guidance of 2.3% to 2.5% growth; flat sales results versus previous guidance for an increase of 0.3% to 0.7%; and adjusted earnings per share of $3.95 to $4.00, down from $4.10 to $4.30 previously.
The FactSet consensus is for same-store sales growth of 2.1%, sales of $25.0 billion, up about 0.7% from the previous year, and EPS of $4.21.
Read: J.C. Penney to close three stores, foreshadows further closures
Macy’s CEO Jeff Gennette says the holiday season started off well, but then mid-December rolled around and things went downhill. Business didn’t pick up until the week of Christmas, he said in a statement.
Sales growth in areas like fine jewelry and women’s shoes was offset by underperformance in some categories, like fashion watches and seasonal sleepwear; temporary fulfillment changes after a fire at a West Virginia distribution center; and an “underestimation” of the impact that a pre-Christmas promotional event would have.
“In our view, the main issues came from the stores,” said GlobalData’s Saunders. “Some stores had virtually no holiday cheer and were crammed full of dull merchandise. This unpleasant and uninspiring shipping environment meant Macy’s was not able to capitalize on strong footfall to malls and cities.”
Macy’s shares plummeted nearly 19% in Thursday trading, dragging down other retailers. Shares closed down 17.7%, the biggest percent decline on record, based on data going back to 1992. Even Target Corp. TGT, -2.85% , which reported upbeat holiday results, wasn’t resistant to the knock-on effect.
See: Target will be ‘one of the top’ holiday performers: Moody’s
Saunders worries that Macy’s turnaround, which was accelerating, has now been halted because of the company’s “inability to get the basics of retail right across all parts of its business.”
Christina Boni, Moody’s department store analyst, looks on the bright side.
“Macy’s is addressing the shortfall in January and is now anticipating gross margin to be lower than originally anticipated as it takes actions to ensure clean inventories,” she wrote.
She also highlights Macy’s efforts to lower its debt, down by $750 million in the fourth quarter, “which we anticipate will continue to support maintaining and improving credit metrics.”
Macy’s shares have gained 2% over the last year while the SPDR S&P Retail ETF XRT, -1.60% has fallen 5.6% and the S&P 500 index SPX, +0.45% is down 5.5% for the period.