Macy’s Q3 Slow Sales Result Of Consumer Disconnect?

Macy’s third-quarter earnings report released Wednesday (Nov. 12) shows the retail giant may not be shielded from the typical woes of the retail industry.

A New York Times article referenced Macy’s “lackluster sales,” and suggested its failing to clear the hurdle of attracting shoppers to its stores — whether it be online or through its brick-and-mortar locations. Sales this quarter dropped 1.3 percent from last year’s third-quarter results to $6.2 billion. The report said Macy’s was able to keep costs down, which gave the company a profit increase to $217 million, a 23 percent increase from last year’s $177 million.

“We are very pleased with our third-quarter earnings, even though the sales performance fell short of our expectations,” Terry Lundgren, Macy’s CEO, said in a company statement. “On a two-year basis, our third quarter sales trend was essentially unchanged from the first half of 2014. We knew we were up against very strong third quarter sales growth for our company last year, and thus we had anticipated that our year-over-year comparison would be lower in the third quarter than in the fourth quarter.”

Macy’s earnings was off the mark of Wall Street’s predictions, as CNBC reported that  it had expected to see an earnings of 50 cents a share on $6.34 billion in revenue. Macy’s reported earnings per share of 61 cents on sales of $6.2 billion. Same-store sales for Macy’s fell 1.4 percent, which CNBC reported “analysts polled by Consensus Metrix had forecast same-store sales would rise 1.9 percent.”

“We were not immune to the weaker-than-anticipated consumer spending,” CFO Karen Hoguet said during the company’s earnings call Wednesday (Nov. 12). “We did not sustain the momentum of the strong start to our ‘Back to School’ business and kids.”

In that call with investors Hoguet did suggest that the buy online, pick up in store program was getting attention and should help the company throughout the holiday season. As that holiday shopping season ramps up, Lundgren said the company’s plans for engaging online shoppers with in-store-pick-up could help boost both online and in-store sales to both Macy’s and Bloomingdales. This has kept Lundgren hopeful for next quarter’s sales. Macy’s is also among the retailers that will open at 6 p.m. on Thanksgiving Day to give a boost to holiday sales.

“Going forward, we remain optimistic for the fourth quarter based on several factors. …We have new store, omnichannel and marketing strategies in place that we believe will drive incremental business throughout the fourth quarter. This includes Buy Online Pickup in Store now rolled out to all full-line Macy’s and Bloomingdale’s locations, Same Day Delivery pilots up and running in eight major Macy’s markets and four Bloomingdale’s markets, and improved functionality and usability in upgraded mobile apps,” Lundgren said in the earnings release.

“We are poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year. This adds up to a strong opportunity to continue to grow our business this holiday, a time of year when customers naturally gravitate to Macy’s and Bloomingdale’s as primary shopping destinations.”

“Macy’s and other retailers continue to struggle with sluggish sales growth as consumers spend warily after the recession and increasingly look to buy online,” the NY Times reported. “Still, Macy’s has weathered the storm better than most.”

Slow sales haven’t hurt overall profit for the retail giant and the company reported a net income of $733 million, up from $675 million for the same period last year.

The Wall Street Journal cited Macy’s CFO Karen Hoguet’s perspective as to why sales may be slow in retail. She suggested consumers are spending their disposable income on larger items, like cars and electronics, that aren’t offered in department stores like Macy’s.

“We were disappointed with our sales,” Ms. Hoguet told analysts, according to the WSJ article.“We found that we were not immune to the weaker-than-anticipated consumer spending.”