Macy's (M) earnings and sales continued to decline in the holiday fourth quarter as the struggling department store gave cautious guidance. The Terry Lundgren-led retailer vowed to invest in the shopping experience as e-commerce erodes its customer base.
Macy's, which also operates the upscale Bloomingdale's chain, earned $2.02 a share, down 3% vs. a year earlier. Revenue fell 4% to $8.52 billion. It was the eighth straight quarter of year-over-year declines on the top and bottom line. EPS did top estimates for $1.96 but analysts had expected $8.62 billion in sales.
Same-store sales fell 2.7% on an owned basis and were down 2.1% when also including licensed stores. Online sales grew at a double-digit pace, Macy's said.
Macy's sees EPS for the current year of $2.90-$3.15, below consensus of $3.20. It expects sales to sink 3.2%-4.3%, in line with Wall Street forecasts. Company-owned comps are seen falling 2.2%-3.3%, with total same-store sales off 2%-3%.
"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," said Lundgren in a statement.
"Key to this is enhancing the customer experience in our stores where we are developing and testing concepts that feature new merchandise and entertainment options alongside enhanced technology to make shopping simpler. Additional initiatives that we believe will improve sales trends in 2017 include continued omnichannel improvements, an updated marketing strategy and a simplified pricing structure."
Macy's said its off-price Backstage brand as a store-within-a-store format is boosting productivity. The retailer also is working on a plan to revive its beauty business.
Macy's plans to invest $900 million this year.
RBC Capital Markets analyst Brian Tunick called Macy's report a "non-event."
"We continue to be intrigued by M's real estate optionality but believe business trends will remain challenged despite the company's ongoing initiatives," he wrote.
But Cowen analyst Oliver Chen called the profit beat "encouraging, given that we believe investor sentiment and expectation bar was low heading into the quarter."
Macy's stock rose as high as 33.49 in morning trade, but found resistance at its 50-day line. Shares fell 1 cent to 32.29 on the stock market today.
Nordstrom (JWN), which reports results Thursday, advanced 0.4%, also well off morning highs. J.C. Penney (JCP), which reports Friday, added 0.4% as well. Kohl's (KSS) fell 0.45%.
IBD'S TAKE: In an e-commerce-driven consumer landscape, the raison d'etre of malls is waning. Some shopping arenas are calling on mayhem and drama to boost foot traffic.
It's been quite the roller coaster for Macy's stock in recent months. Department stores got a postelection bump, but that rally was short-lived after Macy's, Kohl's and others reported disappointing holiday-period sales figures. Shares have been trading below their 50-day moving average since mid-December.
Macy's shares rose in recent weeks on reports that Macy's might be looking to sell itself, according to reports. Saks Fifth Avenue parent Hudson's Bay approached Macy's about a potential acquisition, said the Wall Street Journal in early February, although real estate talks were also said to be on the table.
Macy's said it would not discuss "rumors or speculation," but executives did say they would "work closely" with its real estate team and "get a lot done" this year.
Broadly, department stores have been in a rut, to put it gently. Amazon (AMZN) and e-commerce alternatives threaten to pressure brick-and-mortar stores even further, and retailers are stuck in a vicious cycle of heavy discounting that's tough to escape.
Macy's insists that brick-and-mortar stores can thrive, with the goal of grabbing a larger of share of a declining pie.
"There's enough customers in the mall," CEO Lundgren said on the conference call. "It's just a matter of where they are shopping."
Meanwhile, Dillard's (DDS), which also disclosed results Tuesday, reported diluted per-share earnings of $1.72 a share, including a 13-cent-per-share after-tax asset impairment, on 6% in revenue declines to $1.98 billion. Analysts had expected $2.26 a share on $2.01 billion in revenue.
"Our operating results reflect another quarter of mall traffic declines from continued retail industry challenges," said Dillard's CEO William Dillard II, in a statement. "In response, we are ramping up our efforts to bring more distinctive brand and service experiences to Dillard's, both in-store and online."
Shares of Dillard's tumbled 8.3% to 53.55, hitting a five-year low intraday.
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