Macy's (M) Misses Q2 EPS by 13c; Will Sell Downtown Brooklyn Property

Macy's (NYSE: M) reported Q2 EPS of $0.64, $0.13 worse than the analyst estimate of $0.77. Revenue for the quarter came in at $6.1 billion versus the consensus estimate of $6.23 billion.

On an owned basis, second quarter comparable sales declined by 2.1 percent.

“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. We expect an improvement in trend beginning in the second half of 2015 based on a range of promising new strategic initiatives, including those initially announced in January, which we believe will transform our company in the years ahead,” said Terry J. Lundgren, Macy’s chairman and chief executive officer.

“In the second quarter, we removed a major Friends & Family promotional event from Macy’s calendar. In addition, as a result of the previous port slowdown, planned markdowns in many departments were delayed into the second quarter to clear merchandise that arrived late. Moreover, throughout the first half of the year, overall consumer demand has been restrained in many of the categories of merchandise we sell, and the strong U.S. dollar has led to significantly lower international tourist spending,” Lundgren said.

“Our work to enhance the performance of our business through organic growth and new businesses is multi-dimensional and rooted in the extraordinarily talented management team at Macy’s, Inc. We remain committed to enhancing value for our shareholders as we strengthen our position as a world-class omnichannel retailer with a capability to serve consumers in new ways,” he added.

Real Estate

Following a competitive bidding process conducted over the past year, the company today announced an agreement to sell property in downtown Brooklyn to Tishman Speyer (see separate news release) to take advantage of the inherent real estate value in this prime location while making the Macy’s store more productive and easier for customers to navigate. This transaction will enable Macy’s to re-create its Fulton Street store while further enlivening one of New York City’s most dynamic neighborhoods.

Macy’s, Inc. continually evaluates the highest and best use of its properties and its overall real estate portfolio. In light of current market conditions, the company has retained specialized real estate advisors, in addition to financial, legal and tax advisors, to intensely study its real estate portfolio to determine where opportunities exist that would further enhance the value of the company. Macy's is actively working with its advisors and will communicate the results of its analysis and review as soon as complete.

Looking Ahead

Primarily based on weaker-than-expected sales performance in the first half, the company is reducing its full-year 2015 guidance for comparable sales on an owned plus licensed basis to be approximately flat, compared with previous guidance for growth of approximately 2 percent. Comparable sales on an owned basis will be approximately 50 basis points lower than on an owned plus licensed basis. The company expects total sales to be down by approximately 1 percent in 2015, compared to previous guidance for total sales growth of approximately 1 percent.

The company is maintaining its guidance for 2015 earnings per diluted share to be in the range of $4.70 to $4.80 as a result of the expected $250 million gain on the sale of real estate in downtown Brooklyn, which was not factored into previous calculations.

**** The Street sees FY15 EPS of $4.63.

For earnings history and earnings-related data on Macy's (M) click here.

You May Also Be Interested In

• Novartis (NVS) Tops Q1 EPS by 13c, raises guidance
• Renault posts revenue beat in Q1, confirms full-year outlook
• Pinnacle Financial Partners (PNFP) Tops Q1 EPS by 3c; offers outlook