Macy’s Lowers Sales Outlook

Updated Aug. 13, 2014 2:26 p.m. ET


Macy’s Inc.



M -5.51%



Macy’s Inc.


U.S.: NYSE


$56.47


-3.29
-5.51%



Aug. 13, 2014 4:00 pm


Volume (Delayed 15m)
:
17.98M



AFTER HOURS



$56.66


+0.19
+0.34%


Aug. 13, 2014 5:33 pm


Volume (Delayed 15m)
:
466,669




P/E Ratio
14.05

Market Cap
$21.54 Billion


Dividend Yield
2.21%

Rev. per Employee
$161,293









08/13/14 U.S. Stocks End Higher
08/13/14 Macy’s Disappointing Results R…
08/13/14 Stocks to Watch: Macy’s, Deere…
More quote details and news »



reported weaker-than-expected results and lowered its sales forecast for the year, as one of retail’s solid performers succumbed to the sluggish demand plaguing the broader industry.

The results added to concerns about the consumer that have been building as typically strong companies like


Michael Kors Holdings Ltd.



KORS +1.65%



Michael Kors Holdings Ltd.


U.S.: NYSE


$78.72


+1.28
+1.65%



Aug. 13, 2014 4:03 pm


Volume (Delayed 15m)
:
3.28M



AFTER HOURS



$77.71


-1.01
-1.28%


Aug. 13, 2014 5:28 pm


Volume (Delayed 15m)
:
22,671




P/E Ratio
22.11

Market Cap
$15.89 Billion


Dividend Yield
N/A

Rev. per Employee
$390,803









08/13/14 Macy’s Disappointing Results R…
08/12/14 Markdowns at Kate Spade Hurt M…
08/05/14 Coach Profit Declines on Weak …
More quote details and news »



and


Kate Spade



KATE +7.76%



Kate Spade & Co.


U.S.: NYSE


$31.25


+2.25
+7.76%



Aug. 13, 2014 4:00 pm


Volume (Delayed 15m)
:
17.40M



AFTER HOURS



$30.98


-0.27
-0.88%


Aug. 13, 2014 5:29 pm


Volume (Delayed 15m)
:
43,695




P/E Ratio
32.44

Market Cap
$3.67 Billion


Dividend Yield
N/A

Rev. per Employee
$162,538









08/13/14 Macy’s Disappointing Results R…
08/12/14 Markdowns at Kate Spade Hurt M…
08/12/14 Stocks to Watch: Intercept Pha…
More quote details and news »



& Co. have pointed to a need to ramp up discounts to clear merchandise. Macy’s shares were down 6.4% in afternoon trading.

The pressure appears to be widespread. On Wednesday, the Commerce Department reported that spending at U.S. retailers was flat in July, the latest sign that consumer demand remains fragile even five years after the recession’s end. That, in turn, is calling into question optimistic projections for economic growth.

“Many customers are still feeling the impact of an economic environment that at best is improving very gradually,”

Karen Hoguet,

Macy’s chief financial officer, told analysts on a conference call.

Macy’s, with around 840 stores, is the first of the major retailers to unveil quarterly results at a time when the industry faces pressures on a variety of fronts. Business across the retail industry has failed to pick up despite the mild summer weather and an improving macroeconomic backdrop that includes lower unemployment and a recovering housing market.

Macy’s results stood out because the department store operator had managed to buck those trends. Like many retailers, its sales were hurt in its first quarter by bad weather. But the rebound in the three months ended Aug. 2 wasn’t strong enough to make up for the shortfall.

As a result, Macy’s reduced its forecast for sales growth excluding newly opened or closed stores for the full year to 1.5% to 2%, compared with 2.5% to 3% previously. Same-store sales in the latest period climbed 3.4%, excluding departments licensed to third parties.

Retailers have increasingly been forced to rely on discounts to tempt shoppers to make purchases, a strategy that Ms. Hoguet said is here to stay.

“This is a very promotional business,” Ms. Hoguet told analysts. “Our customers very much want value and very much want promotions.”

Her comments echoed those made by Michael Kors and Kate Spade, which said discounts dented their second-quarter gross margins. Other retailers are also pointing to consumers that remain cautious with their spending.

“Consumers remain very thoughtful about their spending,” said

Lee Bird,

chief executive of At Home, a home décor big box chain based in Dallas that operates more than 70 stores. “Our customer comes in with pictures, swatches, competitor prices, she’s already done her research and knows exactly how much she is going to spend.”

At Destination XL, a big-and-tall chain with more than 400 stores, Chief Executive

David Levin

said shoppers are becoming more particular about their purchases. The number of customers who researched their purchases on the store’s website before coming in doubled this year to 40%, and shoppers are delaying purchases until the last minute, he said.

“I can’t tell you how many times a guy comes in on Friday to buy something to wear that night, or even to get fitted for his own wedding the day before,” Mr. Levin said. “The rules are changing. People are shopping less, but once they’re in the store or on our website, they’re buying more.”

For the period ended Aug. 2, Macy’s posted a profit of $292 million, up from $281 million a year earlier. Revenue rose 3.3% to $6.27 billion.

The company has been cutting costs, closing stores and eliminating jobs as it attempts to save $100 million a year. Still, gross margin fell to 41.4% from 41.8%.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Shelly Banjo at shelly.banjo@wsj.com

  Click to listen highlighted text! Updated Aug. 13, 2014 2:26 p.m. ET Macy’s Inc. M -5.51% Macy’s Inc. U.S.: NYSE $56.47 -3.29 -5.51% Aug. 13, 2014 4:00 pm Volume (Delayed 15m) : 17.98M AFTER HOURS $56.66 +0.19 +0.34% Aug. 13, 2014 5:33 pm Volume (Delayed 15m) : 466,669 P/E Ratio 14.05 Market Cap $21.54 Billion Dividend Yield 2.21% Rev. per Employee $161,293 08/13/14 U.S. Stocks End Higher 08/13/14 Macy’s Disappointing Results R… 08/13/14 Stocks to Watch: Macy’s, Deere… More quote details and news » reported weaker-than-expected results and lowered its sales forecast for the year, as one of retail’s solid performers succumbed to the sluggish demand plaguing the broader industry. The results added to concerns about the consumer that have been building as typically strong companies like Michael Kors Holdings Ltd. KORS +1.65% Michael Kors Holdings Ltd. U.S.: NYSE $78.72 +1.28 +1.65% Aug. 13, 2014 4:03 pm Volume (Delayed 15m) : 3.28M AFTER HOURS $77.71 -1.01 -1.28% Aug. 13, 2014 5:28 pm Volume (Delayed 15m) : 22,671 P/E Ratio 22.11 Market Cap $15.89 Billion Dividend Yield N/A Rev. per Employee $390,803 08/13/14 Macy’s Disappointing Results R… 08/12/14 Markdowns at Kate Spade Hurt M… 08/05/14 Coach Profit Declines on Weak … More quote details and news » and Kate Spade KATE +7.76% Kate Spade & Co. U.S.: NYSE $31.25 +2.25 +7.76% Aug. 13, 2014 4:00 pm Volume (Delayed 15m) : 17.40M AFTER HOURS $30.98 -0.27 -0.88% Aug. 13, 2014 5:29 pm Volume (Delayed 15m) : 43,695 P/E Ratio 32.44 Market Cap $3.67 Billion Dividend Yield N/A Rev. per Employee $162,538 08/13/14 Macy’s Disappointing Results R… 08/12/14 Markdowns at Kate Spade Hurt M… 08/12/14 Stocks to Watch: Intercept Pha… More quote details and news » & Co. have pointed to a need to ramp up discounts to clear merchandise. Macy’s shares were down 6.4% in afternoon trading. The pressure appears to be widespread. On Wednesday, the Commerce Department reported that spending at U.S. retailers was flat in July, the latest sign that consumer demand remains fragile even five years after the recession’s end. That, in turn, is calling into question optimistic projections for economic growth. “Many customers are still feeling the impact of an economic environment that at best is improving very gradually,” Karen Hoguet, Macy’s chief financial officer, told analysts on a conference call. Macy’s, with around 840 stores, is the first of the major retailers to unveil quarterly results at a time when the industry faces pressures on a variety of fronts. Business across the retail industry has failed to pick up despite the mild summer weather and an improving macroeconomic backdrop that includes lower unemployment and a recovering housing market. Macy’s results stood out because the department store operator had managed to buck those trends. Like many retailers, its sales were hurt in its first quarter by bad weather. But the rebound in the three months ended Aug. 2 wasn’t strong enough to make up for the shortfall. As a result, Macy’s reduced its forecast for sales growth excluding newly opened or closed stores for the full year to 1.5% to 2%, compared with 2.5% to 3% previously. Same-store sales in the latest period climbed 3.4%, excluding departments licensed to third parties. Retailers have increasingly been forced to rely on discounts to tempt shoppers to make purchases, a strategy that Ms. Hoguet said is here to stay. “This is a very promotional business,” Ms. Hoguet told analysts. “Our customers very much want value and very much want promotions.” Her comments echoed those made by Michael Kors and Kate Spade, which said discounts dented their second-quarter gross margins. Other retailers are also pointing to consumers that remain cautious with their spending. “Consumers remain very thoughtful about their spending,” said Lee Bird, chief executive of At Home, a home décor big box chain based in Dallas that operates more than 70 stores. “Our customer comes in with pictures, swatches, competitor prices, she’s already done her research and knows exactly how much she is going to spend.” At Destination XL, a big-and-tall chain with more than 400 stores, Chief Executive David Levin said shoppers are becoming more particular about their purchases. The number of customers who researched their purchases on the store’s website before coming in doubled this year to 40%, and shoppers are delaying purchases until the last minute, he said. “I can’t tell you how many times a guy comes in on Friday to buy something to wear that night, or even to get fitted for his own wedding the day before,” Mr. Levin said. “The rules are changing. People are shopping less, but once they’re in the store or on our website, they’re buying more.” For the period ended Aug. 2, Macy’s posted a profit of $292 million, up from $281 million a year earlier. Revenue rose 3.3% to $6.27 billion. The company has been cutting costs, closing stores and eliminating jobs as it attempts to save $100 million a year. Still, gross margin fell to 41.4% from 41.8%. Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Shelly Banjo at shelly.banjo@wsj.com Powered By GSpeech