Macy’s stock has fallen sharply after the department store chain reported miserable second quarter earnings, painting an even bleaker picture for sector.
The back story. Department store stocks have struggled this year with Macy’s , J.C. Penney and Nordstrom all down more than 30% in 2019.
The growth of e-commerce companies, such as Amazon , has hit the large stores in recent times and the escalating trade war between the U.S. and China has made things worse for the industry this year.
In its first quarter results Macy’s beat expectations for earnings and sales but the latter was still down from the previous year.
The company warned that President Donald Trump’s threat of further tariffs on $300 billion worth of Chinese goods, including clothing and footwear, key retail items, would be felt by U.S. consumers.
On Tuesday, the U.S. Trade Representative (USTR) delayed tariffs on clothing and footwear until 15 December.
What’s new. Macy’s second quarter profit of $86 million, or 28 cents per shares, fell far below analysts’ expectations of 46 cents per share.
The company also trimmed its profit outlook for the year to between $2.85 and $3.05 per share, down from a range of $3.05 to $3.25.
Chief executive Jeff Gennette said the company had been forced to heavily discount products to clear excess spring inventory, which hit earnings.
A fashion miss in the company’s women’s sportswear brands, slow sales of warm weather clothing and a decline in international tourism, were behind rising inventory levels, Gennette said.
Macy’s stock dropped 17% in early trading to its lowest price in almost 10 years.
The retailer said its updated guidance did not reflect the fourth tranche of tariffs on Chinese goods and that it would evaluate the USTR’s delay announcement.
Moving forward. Macy’s insisted it was entering the Fall with the right inventory levels and that other areas of the business were performing well.
However, Wednesday’s dismal earnings was a hammer blow to its share price, which had already fallen 35% this year and by early trading had dropped 46% in 2019.
Any upside from the delay in tariffs on clothing and footwear from China has been drowned out by the earnings miss, and could even throw up more problems for the company and its stock if tensions re-escalate.
Source:: Daily Times