Macy’s Inc (M.N) reported a much bigger-than-expected drop in quarterly sales and slashed its full-year forecast, underscoring U.S. department stores’ uphill struggle against slumping demand for apparel.
The dismal forecast from the retailer pushed its shares down nearly 14 percent to a more than 4-year low, and also weighed on shares of rivals on Wednesday.
Macy’s forecast cut reflects increased pessimism on the consumer’s willingness to shop for apparel and accessories over the balance of the year, Deutsche Bank analyst Paul Trussell wrote in a note.
Apparel sales were also hurt by unseasonably cool weather in late March and early April, when retailers usually launch spring collections.
Macy’s, whose profits have been shrinking for more than a year, said it would intensify cost cutting and monetize unproductive real estate.
“They need to find a way to bring the shopper in the store, to have product that’s emotionally exciting to the consumer, differentiated product that’s not available elsewhere,” Stifel, Nicolaus & Co analyst Richard Jaffe said.
Jaffe said 40 percent of Macy’s merchandise is exclusive, while the rest is available at competitors and at lower prices.
Macy’s said it was working to boost sales by rolling out more of its Backstage off-price stores and launching exclusive product ranges, including a clothing and accessories line in partnership with singers Elton John and Lady Gaga.
However, the company said it does not expect these initiatives to improve sales in the current quarter.
Macy’s will need to take decisive corrective action if it is to avoid becoming a retail irrelevance, Conlumino CEO Neil Saunders wrote in a note.
Shares of rivals Kohl’s Corp (KSS.N), Nordstrom Inc (JWN.N) and J.C. Penney Co Inc (JCP.N), which are all expected to report results this week, were down about 2-7 percent.
Macy’s same-store sales fell a steeper-than-expected 5.6 percent in the first quarter, while net sales declined 7.4 percent to $5.77 billion, missing the average analyst estimate of $5.93 billion, according to Thomson Reuters I/B/E/S.
Excluding items, Macy’s earned 40 cents per share, 4 cents above the average analyst estimate.
Macy’s said it now expects comparable sales on an owned plus licensed basis to fall 3-4 percent in the year ending January, from a 1 percent fall forecast earlier.
The company also reduced its full-year profit forecast to $3.15-$3.40 per share from $3.80-$3.90.
Macy’s stock had lost 44 percent of its value in the past 12 months through Tuesday.