Macy’s Stock Falls 10% As Sales Plunge Worsens

Macy’s (M) shopper exodus continues.

The retailer’s stock fell sharply on Thursday morning after the department store operator reported another batch of dismal results that suggested it is not succeeding in keeping current customers, let alone recruiting new ones.

The company reported a 5.2% drop in comparable sales for the first quarter, the 8th such period of decline in a row, and a bigger drop than in recent quarters. While Macy’s had told analysts in February to expect sales to drop in 2017, the decline was deeper than the 3.1% decline Wall Street was expecting, according to Consensus Metrix. And the retailer’s profit plunged 39%.

Its shares were down 10% in premarket trading.

Macy’s has been struggling with intense competition from the likes of (AMZN), TJX Cos’ (TJX)T.J. Maxx chain and Ulta Beauty (ULTA), as well as its exposure to hundreds of weaker malls that are failing to bring in shoppers. The chain is in the process of closing dozens of stores and working with partners to find ways to extract money from its real estate.

But what it is failing to do is to re-invigorate its main retail business. A case in point: It recently abandoned a partnership with Tailored Brands’ Mens Wearhouse to offer tuxedo rentals. Still, Macy’s is expanding its chain of T.J. Maxx-like discount stores called Backstage and also testing out self service in some shoe areas.

Macy’s recently-installed chief executive, Jeff Gennette, touted some initiatives in the women’s shoes, fine jewelry, and furniture categories, but warned investors in a statement that those will take some time to life the chain out of its doldrums.

“We look forward to expanding these successful initiatives nationally this year and anticipate they will have a measurable impact on our performance starting in the second quarter, building through the fall,” said the 34-year Macy’s veteran who took the reins from long time CEO Terry Lundgren in March.

The retailer still commands a huge, loyal following: Gennette said in March that 43 million people shop at Macy’s each year, and that 10% of those customers generate half of its $26 billion in annual sales. But it’s clear Macy’s needs to win new, and younger customers. Gennette’s plan to fix Macy’s centers on taming out of control discounting, improving its beauty areas, expanding its house brands, and hosting more external brands that would operate their own shops within Macy’s.

Net income attributable to Macy’s shareholders fell to $71 million, or 23 cents per share, in the first quarter ending April 29, from $116 million, or 37 cents per share, a year earlier. Macy’s total sales in the quarter were $5.338 billion, down 7.5% from the same period last year.

Rival department stores Kohl’s (KSS) and Dillard’s (ADDS) also on Thursday reported quarterly sales declines.

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