Macy’s downward spiral continued, with profits at the start of the year plunging as sales dwindled.
Shares in the iconic but beleaguered retailer followed suit, with the price plummeting 13% to $25.53 in morning trading. The last time the share price sunk that low was in Oct. 2011, more than 5 1/2 years ago .
Macy's, once the gold-standard of the grand department store and world renowned for its name sake Thanksgiving Day parade, has been struggling to reinvent itself, shuttering dozens of locations to focus on its strongest locations. But its most recent financial results show that it has a ways to go before it turns the corner back to profitability.
"These are unusual and challenging times for retail especially for mall based department stores,'' said CEO Jeff Gennette, who called the first quarter "disappointing.''
Gennette who has been at Macy's helm only a few weeks says that the retailer has a chance to grab new customers as Sears, The Limited and other rivals close stores or in some cases go out of business. But the losses of other stores that can help draw shoppers puts even more pressure on Macy's mall-based locations that have "already seen a slow down in traffic.''
For the quarter ending April 29, Macy's profit dropped to $71 million as compared to $116 million during that period last year. And Macy's earnings of 23 cents per share dramatically missed analysts' consensus of 35 cents. Sales dropped 7.5% to $5.3 billion vs. $5.8 billion in the first quarter of 2016.
Macy's has been roiled by the same forces that are rattling many traditional retailers who are competing with online giant Amazon while trying to reshape their in-store experience and woo customers off the couch and through their doors. Industry wide, roughly 90% of retail sales still occur at an actual store.
The retailer's turnaround strategy is blending efforts to improve traffic at its brick and mortar locations, while also aggressively improving its online and mobile experiences. In store, Macy's is aiming to ramp up its number of exclusive items. It is also pushing new displays of fine jewelry and shoes that will be visible at all locations by August, potentially leading to a modest boost in sales in the latter half of the year.
On the digital front, it's bolstering its mobile app, and also working to improve the option of buying online and picking up items in store.
Previously Macy's announced plans to shutter 100 stores to boost cash and streamline its operations. Gennette did not rule out closing even more locations in the future if the sale of the real estate is more lucrative than a given store's sales activity. But such plans are not in the works yet.
“I’m not going to say we're not going to close more stores beyond those 100,'' he said. "but we do feel we got to the right level.’’