Iconic department store Macy’s Inc. slashed its annual sales outlook after disappointing second-quarter earnings as it struggles to attract customers hit by inflation.
Macy’s shares fell 13 percent on Wednesday to $15.45.
Retailers were forced to lower prices on mid- to high-end items and offer more promotions to compete with more affordable rivals, but sales still fell.
The company maintained its full-year profit guidance.
As everyday shoppers prioritize value, they are turning to larger competitors like Target and Walmart that offer essentials at low prices.
Both chains recently raised their full-year guidance, citing better-than-expected profits.
All eyes are now on Macy’s new CEO Tony Spring and his plan to turn the company around with a “Bold New Chapter” that involves closing stores and strengthening its luxury business.
Macy’s has been under pressure since it last month terminated talks with ArkHouse Management and Brigade Capital to take it private for $6.9 billion in July, saying the proposal failed to provide “compelling value.”
Macy’s announced in February that it would close 150 stores, about 30% of its namesake chain.
“Macy’s has been experiencing declining store traffic and sales for several quarters, which is not a surprise to investors,” Hita Herzog, chief research officer at H Squared Research and an adjunct lecturer at Parsons School of Design, told The Post.
“There are high expectations for Spring to turn around our revenue and traffic issues, and his ability to deliver will be scrutinized as the end of his term approaches.”
The company on Wednesday predicted third-quarter profit would also disappoint.
Even though shoppers are in the middle of the busy shopping season, many are turning to lower-cost retailers to stock up on their back-to-school shopping lists.
Macy’s lowered its full-year net sales forecast to $22.1 billion to $22.4 billion, down from its previous forecast of $22.3 billion to $22.9 billion.
The company said it had lowered its full-year outlook to reflect “more picky consumers” in the market and to “address ongoing uncertainty.”
Second-quarter net sales fell 3.8% to $4.9 billion, a bigger drop than the 0.23% decline to $5.1 billion expected by LSEG analysts.
Same-store sales at Bloomingdale’s fell 1.1 percent, down from a 0.8 percent increase in the previous quarter.
Macy’s has struggled to retain customers and grow profits amid rising prices.
Macy’s struggles to attract cost-conscious customers because of its outdated store format, Mr. Herzog said.
“The stores are huge, the product selection is unattractive and, when you combine that with price-sensitive customers, sales don’t grow,” Herzog told the Post. “While a focus on smaller stores might help, the days of people shopping and spending their day in megastores in their current format are over.”
Spring, a longtime Bloomingdale’s executive, took the helm at Macy’s in February with a plan to turn around the chain by closing underperforming Macy’s stores and focusing on Bloomingdale’s and Bluemercury.
The retailer saw some growth in its premium beauty business in the second quarter, as Bluemercury’s same-store sales increased 2% in the second quarter.
Spring’s strategy of focusing on affluent customers has led to increased foot traffic and sales at its stores, Herzog said.
“These shoppers are less susceptible to rising prices and are less affected by price hikes on their favorite lipstick, face cream or handbag,” Herzog told the Post.
Spring praised the second-quarter results and said the company remains “committed to returning Macy’s to sustainable profitable growth.”
The company reported adjusted earnings per share of 53 cents, beating the 30 cents expected and up from 26 cents in the year-ago period.
Macy’s reported a better-than-expected gross margin of 40.5% thanks to cost-cutting measures.
