Macy’s Lowers Full Year Forecast Due to Effects of Winter

Macy's Herald SquareNew York—Despite a 3.3% rise in its second quarter sales, Macy’s Inc. today lowered its full-year sales outlook, saying it was unable to make up the shortfall incurred during the first quarter when snowy weather kept shoppers away from its stores.

Net income rose 4% year-over-year to $292 million and while earnings per share totaled 80 cents. Analysts had estimated 86 cents however.

Sales in the second quarter were up 3.3% to $6.27 billion from $6.07 billion a year earlier. Comparable store sales (excluding leased departments) were up 3.4%.

Still the sales increase weren’t enough to offset the effects of a bitter cold and snowy winter. While Macy’s reaffirmed its guidance for 2% to 3% comparable store growth in the second half, it cut its full-year growth forecast from a range of 2.5% to 3% to a lower range of 1.5% to 2%. For the full fiscal year, Macy’s Inc. still expects earnings per share in the range of $4.40 to $4.50.

“We are approaching the second half of 2014 with confident optimism in our business strategies, merchandise assortments and marketing plans, tempered with the reality that many customers still are not feeling comfortable about spending more in an uncertain economic environment,” said Chairman/CEO Terry Lundgren.

Jitters of Wall Street

“Our sales trend improved at both Macy’s and Bloomingdale’s in the second quarter, reflecting a rebound in shopping activity once weather patterns normalized,” Lundgren added.

The news that Macy’s, usually a consistently strong performer, was lowering its outlook spooked Wall Street and created more pressure on other retailers to report including Dillard’s, Walmart and JCPenney.

Coincidentally, the Commerce Department today reported that spending at U.S. retailers was flat in July, the latest sign that consumer demand remains fragile even five years after the recession’s end. That, in turn, is calling into question optimistic projections for economic growth.

Stifel analyst, Richard Jaffe said the improvement in Macy’s second quarter sales “leads us to believe merchandise assortments in stores are on-trend. Expenses were tightly managed, leveraging 70 bps (basis points) as a percentage of sales. While gross margin declined 35 bps, the lean inventory levels likely helped minimize significant clearance activity.”

Nonetheless, he cautioned: “The tough economic environment for retail will likely continue to be a headwind for the company. However, we believe Macy’s continued effective execution of its key strategies — My Macys, MAGIC selling, omni-channel initiatives and merchandising improvements — will drive sales longer term and help the company continue to gain market share.”

Like this? Share it!