Sluggish store traffic has weighed on Macy’s sales and things aren’t expected to pick up until the fourth quarter, if at all this year.
The retailer said Wednesday that first quarter sales for the period ended Apr. 30 fell 7.4% to $5.77 billion. And owed in part to that unfavorable performance, Macy’s cut its profit forecast for the year to between $3.15 and $3.40 per share from its previous guidance of $3.80 to $3.90.
Macy’s shares were down more than 13 percent to $32.09 in New York trading at publication time.
“We are seeing continued weakness in consumer spending levels for apparel and related categories. In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March and first quarter results are below our original outlook,” Macy’s chairman and CEO, Terry Lundgren, said.
Slowed tourism spending (down by double digits) for the second year in a row also hurt sales, as did the closure of 41 stores in 2015. But considering the first quarter is a “relatively small portion” of the total year, Lundgren said Macy’s can make up ground in the coming months, especially in the fourth quarter.
The company plans to focus on three key areas to improve performance in 2016: speed up or scale up things that are working, excite customers with more newness and exclusive goods, and cut back on expenses while investing in key areas like customer service.
To scale up on what’s working, Macy’s said it will roll out more in-store pilots of Macy’s Backstage, the retailer’s off-price format, taking the shop-in-shop count from a current six and adding nine more by the fourth quarter. Bluemercury, the beauty brand Macy’s acquired last year, will see its five already open in-store shops grow to 22 this year.
In its effort to give consumers more newness, Macy’s plans to launch an exclusive clothing and accessories line with Elton John and Lady Gaga, called Love Bravery, and new wearable technology from Samsung.
Macy’s said it will scale back on spending and instead direct resources to improving the front lines, like more full-time store associates and upgraded online customer support.
“We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value,” Lundgren said.
Because of unpredictable consumer spending, Macy’s said, though future performance predictions are “difficult,” that sales for the full year 2016 will likely fall in the 3 to 4 percent range, more than triple its earlier estimate of a 1 percent decline for the year.
Macy’s has plans to open one new namesake store this year, 42 Bluemercury locations (24 freestanding and 18 inside Macy’s), 16 Backstage locations and one Bloomingdale’s Outlet store.
“As we rebuild our business for a comeback that we expect will begin later this year, we continue to focus on agility and innovation—supporting and testing new ideas and approaches so we can identify the best way to serve evolving customer needs, and moving fast to scale up the most successful pilots on a broader basis to fully capture growth opportunities,” Lundgren said.