NEW YORK (AP) — Macy's profit and sales declined in the third quarter as the department store chain wrestled with cautious spending by customers, rising competition and sluggish demand for cold-weather goods.
Macy's full quarterly financial report was delayed after it discovered late last month that an employee intentionally hid as much as $154 million in company expenses between late 2021 and the third quarter of this year, according to a regulatory filing Wednesday.
Macy's said its internal investigation of the incident is complete and it found that the employee, who acted alone, hid $151 million in company delivery expenses, but that there will be no material impact on company's finances. It also said it was strengthening its existing controls and implemented additional changes designed to prevent a recurrence.
The New York retailer which owns upscale Bloomingdale’s and the cosmetics chain Bluemercury raised sales expectations for the year Wednesday, but lowered profit projections, sending shares plunging nearly 9%.
In the rough operating environment for Macy's, activist investor Barington Capital Group this week asked Macy's to develop a real estate subsidiary, reduce spending, and explore strategic options for Bloomingdale’s and Bluemercury chains, among other things.
Barington follows a number of attempts by other large investors that have attempted to revive the storied retailer.
In July, the retailer cut off monthslong buyout talks with two investment firms, saying the bid was inadequate and the financing was not certain. Macy’s said Arkhouse Management and Brigade Capital Management failed to provide it with additional information by its June deadline, including the highest price they would be willing to pay. Macy’s named two directors to its board backed by Arkhouse in April, ending the takeover attempt and a push by the investment firms to replace most of its board.
Macy’s CEO Tony Spring, after taking over in February, announced a plan to close 150 stores, while upgrading another 350.
At the first 50 stores that Macy’s has upgraded, same store sales rose 1.9%. Macy’s is attempting to find a formula to reinvigorate sales. In the past year it has tested different tactics in dozens of stores, like more salespeople in fitting room areas and shoe departments. The so-called “First 50” strategy is also implementing more visual displays at the first stores to be overhauled.
It is also expanding its Bluemercury and Bloomingdale’s stores.
Macy's earned $28 million, or 10 cents per share, for the three-month period ended Nov. 2. That compares with $41 million, or 15 cents per share in the year-ago period.
Adjusted earnings was 4 cents per share, beating analysts projections by a penny, according to FactSet.
The company had already posted sales results late last month of $4.74 billion, slightly above the $4.72 billion Wall Street was expecting.
Comparable store sales fell 1.3%, better than the decline of 3.3% during the previous quarter.
Macy’s stores had a 2.2% comparable sales decline while Bloomingdale’s had a 2% increase. Same-store sales at Bluemercury rose 3.3%.
Sales of cold weather items have been challenging because of unseasonably warm weather, the company said. It will be hard to make up for those losses because the season between Thanksgiving and Christmas is five days shorter than last year, Macy's said.
The company now expects earnings per share to be $2.25 per share to $2.50 per share for the year, down from its previous estimate of $2.34 to $2.69. But it projected sales of $22.3 billion to $22.5 billion for the year, up from its previous forecast of $22.1 billion to $22.4 billion.
“We are encouraged by the consistent sales growth in our Macy’s First 50 locations and the strong performance of Bloomingdale’s and Bluemercury," Spring said in a statement. “Quarter-to-date, comparable sales continue to trend ahead of third quarter levels across the portfolio.”
