Macy’s, Inc. may have exceeded its most recent earnings guidance, but weak sales at the department store company caused profits to plunge.
In a statement Tuesday, Macy’s reported net income down 31.5% to $543 million for the fourth quarter ended Jan. 30, and sales down 5.3% to $8.87 billion over last year. Comparable sales were down 4.8%.
For the full year 2015, net income was down nearly 30 percent to $1.07 billion from $1.53 billion the previous year, and sales were down 3.7% to $27.08 billion.
Terry Lundgren, Macy’s, Inc. chairman and CEO, said despite the challenges 2015 brought to the business, sales improved in January when the weather finally got colder and the retailer ended the year with inventories in good shape.
“We are encouraged by the way the business responded going into 2016, and we believe we are well positioned to stabilize sales levels this year as we lay the foundation for enhanced shareholder value and sustained, long-term profitable growth,” Lundgren said. “Given our determination to rise above our disappointing 2015 performance, I have reminded my team that our setback last year is a setup for our comeback.”
Last year was a tough one for retail across the board and Macy’s, among other retailers, started looking to its real estate for sources of income as sales continued to slide and investors started to put on the pressure.
One of Macy’s major investors, Starboard Value, said last month that though it appreciated the retailer’s efforts to cut costs, tapping into real estate assets would unlock value for Macy’s shareholders.
For 2015, adjusted earnings per diluted share were $3.77, up from the company’s previous guidance of $3.54 to $3.59.
Macy’s said in its Tuesday statement that it has started contacting parties that could be interested in joint ventures concerning the company’s flagship and mall-based properties.
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“There has been a high degree of initial interest at this preliminary stage but it is premature to comment further at this stage,” the statement noted.
The retailer said it’s still “rooted” in its M.O.M. strategies—My Macy’s localization, Omnichannel and Magic Selling (the company’s proprietary customer engagement strategy). The strategies have consistently resonated with consumers, Macy’s said, and the company will work to redefine and update those concepts going forward.
“After the previous six consecutive years of cumulative success, 2015 reminded us that retailing is a dynamic business that requires continuous reinvention as the customer evolves,” Lundgren said, stressing the importance of keeping in mind the company’s investments in 2015, adding that those investments will prove beneficial down the road. “Today, we are examining every aspect of our business so we can grow profitable sales and re-attain our goal over time of an EBITDA (earnings before interest, tax, depreciation and amortization) rate as a percent of sales of 14 percent.”
There were still high points for Macy’s last year. Its online business saw another year of double-digit growth, the company expanded its online capacity with a new fulfillment center in Tulsa, Oklahoma, and it forged new licensing department arrangements with LensCrafters, Men’s Wearhouse and Best Buy to expand its assortment. The company also launched its off-price concept, Macy’s Backstage and started initial testing for e-commerce in China.