Macy’s (M) cold streak just keeps getting colder.
The department store reported Wednesday that comparable sales fell 3.9% last quarter for their third consecutive drop. Overall revenue totaled $5.87 billion for the period ended Oct. 31, well below Wall Street forecasts. Investors punished the stock, sending it down 5% in premarket trading. The company also said it would extend an already announced schedule of store closings.
Macy’s, the largest U.S. department store company by sales, has been trying to navigate a consumer shift away from apparel—a category that makes up the bulk of its sales—to items like cars, electronics, and home repairs, which are areas where Macy’s is virtually absent. Meanwhile U.S. malls, many of which are anchored by Macy’s stores, continue to be hit by falling shopper traffic.
Compounding the retailer’s challenges even further: Tourism in the U.S. is way down, hurting its stores in Manhattan, San Francisco, and Miami, its highest grossing locations. Macy’s gets 5% of sales from international tourists. The company also owns the Bloomingdale’s chain.
“We are disappointed that the pace of sales did not improve in the third quarter,” Macy’s CEO Terry Lundgren said in a statement. “Spending by domestic customers remained tepid, especially in key apparel and accessory categories. Simultaneously, the slowdown in buying by international visitors continued to significantly impact Macy’s and Bloomingdale’s.”
Earlier this year, shortly after reporting poor results, Macy’s announced it would close up to 40 stores. On Wednesday, the retailer said it expected more closings beyond the current round, which are slated to happen by the end of January. About 800 Macy’s and Bloomingdales stores are currently open in the U.S.
The company also announced it would not spin off its stores into a real estate investment trust, something activists investors were pushing it to do to unlock the value of its real estate, which notably includes Macy’s Manhattan flagship, a store that could be worth $5 billion on its own. Lundgren said a REIT did not have an upside, but he did leave the option on the table. (This week, McDonald’s also said it had opted not to create a REIT.)
Macy’s has been trying to diversify its business. It is opening a store in the United Arab Emirates in a few years and has launched T.J. Maxx-like rival chain called Backstage.
But within its own department stores, Macy’s is looking to branch out of apparel a bit more and is focusing on its 150 best stores to improve merchandise presentation. Those stores will see more assortments in key destination departments such as jewelry and watches.
For now though, the results are worrisome coming just ahead of the key holiday shopping season.