Persistent weakness

Macy’s (M) has missed consensus Wall Street sales estimates in each of the first three quarters of fiscal 2015, which will end January 30, 2016. In fiscal 2014, Macy’s missed analyst sales estimates in all four quarters. The third quarter of fiscal 2015 was the third consecutive quarter in which the company’s sales declined.

Weak Sales: Specific to Macy’s or Other Department Stores, Too?

Reasons cited by Macy’s for weak sales

Macy’s 3Q15 sales declined by 5.2%, following a 2.6% and 0.7% decline in 2Q15 and 1Q15, respectively. Overall, Macy’s sales have declined by 2.8% in the first nine months of fiscal 2015 to $18.2 billion from the comparable period of the previous year.

Macy’s has cited several reasons for its lower sales:

  • tepid consumer spending by international tourists at locations such as New York, Las Vegas, San Francisco, and Chicago
  • unfavorable weather
  • a decline in sales of private label goods to third parties

The company has also been experiencing slower growth in its center core categories such as jewelry. Macy’s constitutes 0.1% of the iShares Russell 1000 ETF (IWB).

How are peers faring?

Macy’s sales growth has underperformed peers Nordstrom (JWN), Kohl’s (KSS), Dillard’s (DDS), and JCPenney (JCP) in each of the three quarters of fiscal 2015. In 3Q15, Nordstrom, Kohl’s, and JCPenney reported sales growth of 6%, 1.2%, and 4.8%, respectively. In contrast, Macy’s reported a 5.2% decline. Dillard’s reported a 1.8% decline in its 3Q15 sales.

According to data released by the United States Census Bureau on December 11, 2015, the unadjusted retail sales at department stores (excluding leased departments) from January to November 2015 declined by 1.9% on a year-over-year basis.

Department stores have been under pressure this year due to cautious consumer spending, heightened competition from online retailers, and off-price stores. However, as reflected in the 3Q15 sales growth numbers, Macy’s peers have been able to do a better job combating a tough retail environment. In the next part of this series, we’ll look at the initiatives taken by Macy’s to improve its same-store sales.

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