Macy’s (M) blamed everything from the nasty winter weather, to tourists cutting back on spending, to a West Coast port slowdown for its 0.1% comparable sales decline in the first trimester of the fiscal year.
While that is only a mild drop, analysts were expecting a 1% jump in the three months ended May 2, according to Consensus Matrix, and continued a trend of up-and-down numbers in recent quarters, a contrast to years of more solid growth earlier in the decade.
Since the Great Recession, Macy’s has deftly pulled away from rivals such as J.C. Penney (JCP) and Kohl’s (KSS) thanks to a quicker integration of its stores and e-commerce, massive renovations at key stores like its Manhattan and San Francisco flagships that are big draws for tourists, and more enticing fashion exclusives. (It also helps to own the upscale Bloomingdale’s chain given the boom in luxury retailing.)
But lately, Macy’s has stumbled: on Wednesday, it reported a profit of 56 cents per share for the first quarter of 2015, the 13-week period ended May 2, down from a year earlier and below the 62 cents number Wall Street expected.
“We fell short because of a confluence of factors,” Macy’s CEO Terry Lundgren, said in a statement. “Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels. Moreover, sales were negatively affected by lower levels of spending by international tourists visiting major U.S. cities with flagship Macy’s and Bloomingdale’s stores, including New York City, Chicago, Las Vegas and San Francisco.”
What’s more, a big corporate re-organization announced this winter has proved to be a distraction, at least in the short term as executives get used to new roles.
Macy’s sluggishness of late suggests that even the sector leader is not immune from all the pressures on department stores, from the ascent of discount fashion chains like T.J. Maxx (a unit of TJX Cos (TJX)) to the decline of malls. In just the last few months, Macy’s has announced a series of steps aimed at sparking renewed growth, including launching a T.J. Maxx-like off-price chain later this year, and buying Bluemercury, a high-end spa and beauty company. It is even looking at ways to build a bigger presence in China.
“We also are seeing new business initiatives begin to germinate,” Lundgren said. “While these new growth initiatives are early in development, we are moving fast to test, learn and bring the most successful ideas to scale quickly.” Macy’s maintained its 2015 forecast despite the slow start to the year.
In the meantime, investors will have to take whatever bones Macy’s can throw them: the retailer announced a 15% hike in its dividend and increased its share buyback to $2.1 billion. Classic moves from a company going through a rough patch, but not moves that change anything about the fundamental business.