Macy’s Cuts Guidance as Sales, Profit Slide

Separately, Macy’s unveiled the formation of a joint venture with Hong Kong-based Fung Retailing Limited to test e-commerce in China. Macy’s will get an additional $100 million over three years and continue to own and operate four floors of the nine-storey store. Macy’s now expects total sales to be down by roughly 1%, versus growth of 1%, but it is maintaining its EPS estimate of $4.70 to $4.80.

China’s biggest e-commerce company posted quarterly revenues of $3.27 billion, below an expected $3.39 billion.

Macy’s is reporting a 26 percent drop in profits and a sales shortfall after it was hobbled by weak tourist spending and West Coast port delays in the second quarter. Macy’s said Wednesday that it has brought on real estate advisors to “intensely study” its real estate portfolio for opportunities.

Its comparable sales on an owned plus licensed basis shrank 1.5 percent for the quarter. The company earlier forecast a rise of about 2 percent in same-store sales and an increase of about 1 percent in total sales.

“We are disappointed in our second quarter results, which were impacted by a variety of factors, both internal to the company and in the macroeconomic environment”, Macy’s chairman and CEO Terry Lundgren said in a statement Wednesday morning.

“Moreover, throughout the first half of the year, overall consumer demand has been restrained in numerous categories of merchandise we sell, and the strong U.S. dollar has led to significantly lower global tourist spending”, Mr. Lundgren said.

The company was also hurt by the removal of a major promotional event.

Analysts had expected 76 cents per share on sales of $6.22 billion, according to FactSet. In the other release, Macy’s said that it will redevelop its Brooklyn store using $270 million from real estate developer Tishman Speyer.

(M) on Wednesday reported fiscal second-quarter profit of $217 million. Year-to-date it’s down just 1.1%.

Looking ahead, Macy’s said it expects an improvement in trend beginning in the second half of 2015, based on a range of new strategic initiatives, including those initially announced in January. Alibaba announced Tuesday that it’s expanding its brick-and-mortar presence and logistics capabilities in China with a $4.6 billion investment in Chinese electronics retailer Suning.