Macy’s Inc. Issues Weak Outlook as It Invests in New Initiatives

In Reports, What's New, Industry News by Jeff Prine

macy'sCincinnati—Talking up its new endeavors, such as an off-price chain, Blue Mercury, omnichannel selling etc., Macy’s Inc. today hoped to show where its long-term growth might come from after reporting its fourth quarter sales and profit slowed with a weak 2015 forecast.

For the quarter ended Jan 31, the parent of Macy’s and Bloomingdale’s said net profit was down 2.2% to $793 million while total sales edged up 0.6% to $23.1 billion. The figures pointed to a slowing of its traditional department store business. For example, comparable store sales for 2014 rose only 0.7%, or 1.4% including licensed departments—their slowest pace in four years.

Chairman/CEO Terry Lundgren pointed to the company’s investment in new ventures, like an off-price chain, international stores and omnichannel upgrades. Again, he credited the overall health of the company with the continued My Macy’s localization.

Clearly though, Macy’s Inc. is looking for growth in other areas than its department store business.

New Retail Channels

“We have established an entirely new part of our organization to lead innovation and new growth initiatives—including off-price, international and new store formats,” Lundgren added. “We expect some of these new activities to enter start-up phases later in 2015, and we remain committed to succeeding in a test-and-learn environment where the best and most promising ideas can be ramped up quickly. We are very excited about our upcoming acquisition of Bluemercury, Inc., widely recognized as America’s largest and fastest-growing luxury beauty products and spa retailer. We continue to expect to complete the Bluemercury transaction in the first quarter, with an initial focus on accelerating the growth of its base of self-standing specialty stores in urban and suburban markets, as well as on accelerated omnichannel growth and offering Bluemercury products in Macy’s stores. This represents a new channel and access to new customers for our company.”

Meanwhile, Macy’s Inc. forecast 2015 sales to rise a mere 1% with comp store sales up a modest 2%. Earnings per share are estimated between $4.70 to $4.80 a share—below analysts’ estimate for earnings of $4.84 a share with 2% sales growth.

In a conference call with analysts, Chief Financial Officer Karen Hoguet warned that investments would likely take two to three years to bear fruit and the company forecast earnings for the year that fell short of analyst predictions.

“We are making investments in growth,” Hoguet said. “We want to accelerate growth, but it needs to be profitable growth.”

Capital expenditures for 2015 are expected to be approximately $1.2 billion, an increase from $1.07 billion in 2014, reflecting new investment in these growth initiatives

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