Macy’s 4Q profit slumps, but signs of hope emerge in 2016

Profit fell from $793 million in the fourth quarter of 2014 to $544 million, or $1.73 a share.

While comparable-store sales declined 4.3 percent, given the bad holiday season it was better than Wall Street had expected.

Net sales fell 5.3 percent to $8.87 billion, but beat analysts average estimate of $8.83 billion, according to Thomson Reuters I/B/E/S.

“While 2015 was challenging, our sales trend improved in January as the weather turned colder in northern climate zones and Macy’s and Bloomingdale’s were well-stocked in coats, boots, sweaters, gloves, hats and other seasonal goods”, Lundgren said in the earnings statement. “As the year ended, our inventories were in good shape (up by 0.7% on a comp basis)”.

Nordstrom Inc. last week posted lackluster sales results and said it would seek to cut expenses and boost profitability.

The increase helped Macy’s to offset a bleak period during the holidays.

A strong dollar also has taken its tolls on overall spending by tourists from other countries.

Macy’s management expects comparable store sales to rise by about 1% this year, including comparable sales at owned stores at about 50 basis points lower than that.

In looking back on the year, Lundgren pointed out various initiatives. In addition, Macy’s has invested in their use of “BOPs”, or buying online, pick up in-store capabilities. It acquired Bluemercury, the upscale beauty products and spa company. The department store chain expects total sales to fall by about 2% this year as a result of the 40 stores it closed last year. It has started contacting possible interested parties in connection with forging a partnership or joint venture for the flagship and mall-based properties.

Macy’s is making a lot of changes to reinvent the company.

Macy’s also gave an upbeat forecast for its full 2016 sending its shares up by up to 7.6% in trading early Tuesday. Macy’s sees a 1% same-store sales decline for fiscal 2016 on an owned plus licensed basis.

Operating a low-margin business within Macy’s stores, which are often in high-rent areas, could also be expensive, analysts warned.

Macy’s Chief Financial Officer Karen Hoguet said the new Backstage brand would test entry into the booming market for discount stores, which offer up to 80 percent off regular prices. In addition, a new Bloomingdale’s store is expected to open in 2017 in Kuwait, and new Macy’s and Bloomingdale’s stores are planned to open in Abu Dhabi, United Arab Emirates, in 2018 under license agreements with Al Tayer Group.