Macy’s (M) on Tuesday reported another quarter of declining comparable sales and told investors to expect more of the same in 2017 as the department store tries to figure how to be viable in this new shopping era.
The retailer reported comparable sales, which include its fast-growing e-commerce business, fell 2.7% in the holiday quarter and forecast they would drop between 2.2% and 3.3% this year. Macy’s poor results in the last two years come despite massive investments in its online business — it is the sixth largest e-commerce retailer in the U.S. and closing of dozens of stores meant to free the company to invest in its best locations.
But Macy’s has been struggling with intense competition from the likes of Amazon.com (AMZN)and TJX Cos’ (TJX) T.J. Maxx chain, as well as its exposure to hundreds of weaker malls which are failing to bring in shoppers. So the retailer is in the process of closing 66 stores this year with another 30 or so planned a bit further down the line.
“While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” Macy’s CEO Terry Lundgren said in a statement. “We will be investing for the future in 2017. Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster,” he added. The company set his previously announced departure from the corner office to March 23rd, when he will be replaced by Macy’s veteran Jeff Gennette but serve as executive chairman.
As detailed in a new Fortune magazine feature on the travails of U.S. department stores, Macy’s has opened boutiques for brands like Apple, Best Buy, Brookstone, and even Etsy to re-ignite shopper interest and even launched a chain of T.J. Maxx-like stores called “Backstage.” And it is looking into ways to wring out money from its sizable store portfolio. Rival department store operator HBC, (HBC) owner of the Saks Fifth Avenue and Lord & Taylor chains, is reportedly looking for partners to help it buy Macy’s.
Sales in the fourth quarter of 2016 totaled $8.515 billion, down 4% from a year earlier and slightly below analyst forecasts. Macy’s had a profit of $1.54 per-share, or $2.02 excluding certain items, beating Wall Street estimates. Macy’s expects full-year earnings in the range of $2.90 to $3.15 per share.
Shares, which have fallen 20% in the last year, rose 3% in premarket trading.