Macy's Inc. missed quarterly earnings estimates and trimmed its annual sales forecast Wednesday, indicating that the back-to-school and Christmas shopping seasons won't make up for a sluggish first half of the year.
Second-quarter net income rose 3.9 percent to $292 million, or 80 cents a share, from $281 million, or 72 cents, a year earlier, the Cincinnati-based company said in a statement. Analysts had estimated 86 cents on average, according to data compiled by Bloomberg. The shares tumbled the most in two years.
Chief Executive Officer Terry Lundgren has struggled to maintain Macy's sales growth while a choppy economic recovery hurts consumer spending. Second-quarter sales at stores open at least a year rose 3.4 percent, missing the 3.9 percent analysts had projected. The chain has had to rely on discounts and promotional events, such as its Friends and Family sale, to get customers in the door, eroding margins.
"The consumer is still not out of the pressure zone," said Paul Swinand, an analyst at Morningstar Inc. in Chicago. "They're still below their comfort zone."
Macy's stock fell $3.29, or 5.5 percent, to close Wednesday at $56.47 in New York after sliding as much as 5.9 percent for the biggest intraday decline since May 2012. Macy's had gained 12 percent this year through Tuesday.
Macy's, which operates about 840 stores, cut its full-year forecast for comparable-sales growth to 2 percent to 2.5 percent, down from a previous projection of as much as 3 percent.
Total retail sales were little changed in July, the worst performance in six months, as tepid wage growth restrained U.S. consumers. The slowdown followed a 0.2 percent advance in June, the Commerce Department said Wednesday. The median forecast of 82 economists surveyed by Bloomberg called for a 0.2 percent gain. Excluding cars, sales rose 0.1 percent.
Inflation-adjusted average weekly earnings dropped 0.2 percent in the 12 months through June, the worst performance since October 2012, according to Labor Department data. That left consumers with less money to spend.
Macy's has been trying to recover from an unexpected sales decline in the first quarter, when harsh winter weather hurt revenue. In the second quarter, sales rebounded, growing 3.3 percent to $6.27 billion. Still, analysts had predicted $6.3 billion.
"Our outlook for the fall season reflects our confident optimism tempered with the reality that many customers are feeling the impact of an economic environment that, at best, is improving very gradually," Chief Financial Officer Karen Hoguet told investors during a Wednesday conference call to discuss the quarterly report.
Information for this article was contributed by Anne D'Innocenzio of The Associated Press.
Business on 08/14/2014