Department store retailer Macy's (M 25.29, -4.05 -13.8%) trades to about six-year lows today after reporting some tough Q1 results on worse than expected comparable sales and reaffirming FY18 guidance.
Jumping right into the quarter, Macy’s reported Q1 earnings per share (EPS) of $0.24 on revenues which fell about 7.5% compared to last year to $5.34 billion. Both of these results missed the mark, but perhaps the standout miss was from Q1 comps.
Macy’s reported Q1 comparable sales on an owned basis down 5.2% while on an owned plus licensed basis, comps were down 4.6%. On top of that, management noted that sales trends were consistent with their expectations for the quarter and keep the company on track on realize annual guidance of a comp owned plus license sales decline of 2-3% and EPS of $3.37-3.62 excluding retirement plan settlement charges and premiums on debt repurchases.
Management also noted strength in the pilot program rollout. The launch of Macy’s shoe pilot, which began May 1, produced a nearly double-digit shoe sales increase well above the shoe sales trend for the rest of the stores. In jewelry Macy’s expects to roll out the pilot initiative to the roughly 200 remaining stores this quarter, which will then complete the rollout of that initiative.
Further, Macy’s inventory levels were down modestly on a year-over-year basis to about $5.63 billion in total inventory.
Looking ahead, Macy’s noted that trends were better in the back half of the quarter than in the first half. That being said, the company still maintained FY18 guidance of EPS in the range of $2.90-3.15 and revenues down 3.2-4.3% which equates to about $24.67-24.95 billion. Macy’s also still expects comps for FY18 to be down 2.2-3.3% or 2-3% including licenses.
In sum, it’s no secret that traditional brick-and-mortar retail stores are on the mend as consumer shopping habits are at some tough levels. Results from Macy’s in Q1 show that the company’s progress on some sales initiatives have yet to bare the fruit the company desired. However, at the very least management maintained their outlook for the full year and inventory levels remained in check. Macy’s stock might remain range bound for the near future, but beyond FY18 only time will tell.
Shares of retail peers DDS -12.88% (reports earnings May 12 before the open), JCP -8.65% (reported earnings this morning), JWN -7.05% (reports earnings tonight), TGT -3.25%, WMT -0.56% all trade lower with Macy’s today.