Shares of Macy's Inc M rose about 3 percent as investors preferred to overlook the sales shortfall and rather focus on the EPS beat, driven by store closures and lower costs.
- Macy's Q4 EPS $2.02 vs $1.96 Est, Revenue $8.52B vs $8.62B Est
- Macy's Sees FY 2017 EPS $2.90 to $3.15 vs $3.20 Est
- Macy's Sees FY2017 comps To Fall 2.2% - 3.3%, Sales To Slip 3.2% - 4.3%
Macy’s, similar to its department store peers, is another victim of shift in consumer spending as they prefer shopping online ((read: Amazon.com,AMZN) and at discount chains. This lead to disappointing numbers in the last few quarters and invited criticism from activist investor Starboard who urged the management to make money from its vast real estate assets.
“While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” Terry Lundgren, Macy’s chairman and chief executive officer, said in a press release.
Under pressure from Starboard, the company released a list of 68 stores that it plans to close last month and raised about $675 million in real estate transactions in fiscal 2016.
The tepid performance also brought some changes to top management. Chief Executive Lundgren will step down on March 23 and would be succeeded by Jeff Gennette. Lundgren will, however, continue as executive chairman of the company.
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Meanwhile, there was speculation Hudson's Bay had approached Macy's regarding a takeover. Neither company has confirmed the validity of those rumors.
Macy’s is betting on continued omnichannel improvements, refined clearance and off-price strategy, updated marketing strategy and a simplified pricing structure for improvement in 2017.
“We will be investing for the future in 2017. Looking at the continued challenges in the retail environment and changing consumer shopping behaviors, we know we must evolve our strategy and execute faster,” Lundgren said.
“Key to this is enhancing the customer experience in our stores where we are developing and testing concepts that feature new merchandise and entertainment options alongside enhanced technology to make shopping simpler,” Lundgren added.
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