The stock price of Macy’s (NYSE:M) plummeted after reporting lower-than-expected financial results for the first quarter. The company’s CEO Terry Lundgren also warned that the company continues to face strong challenges.
The shares of the company were down more than 14% to $31.77 each at the time of this writing around 2:25 in the afternoon in New York.
Macy’s financial performance
During the first quarter, Macy’s generated earnings of $116 million or $0.37 per share compared with $194 million or $0.56 per share in the same period a year ago.
Wall Street analysts expected the retailer to report earnings of $0.36 per share based on data compiled by Thomson Reuters.
Its revenue was $5.77 billion, down 7.4% from $6.23 billion last year. The company explained that its revenue decline partly reflects the closure of 41 stores.
The company’s operating income was $276 million or 4.8% of sales, down from $409 million or 6.6% sales in the same quarter last year.
Macy’s CEO warns of continued weakness
In a statement, Macy’s CEO Terry Lundgren said, “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.”
“Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some center core categories – further intensifying the challenges associated with growing topline sales revenue,” he added.
For the fiscal 2016, Macy’s expected its earnings to be around $3.14 to $3.40 per share, lower than its previous guidance of around $3.80 to $3.90 per share.
Lundgren also said the company’s management team is “aggressively changing its playbook to gain market share and accelerate progress and progress” for the rest of the year.
“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,” said Lundgren.
To improve the company’s business trend, the management will implement the following:
- Speed up/Scale up what’s working such as the continued rollout of in-store pilots of Macy’s Backstage and Bluemercury.
- Excite customers with greater newness and more exclusive merchandise
- Intensify expense reduction efforts while investing in key areas of customer service