Macy’s Missed on Earnings and Here are All the Details

NEW YOUR (TheStreet) -- Macy’s (M) second-quarter earnings surprisingly fell short of consensus forecasts. The department store retailer also reduced its full-year same-store sales outlook, outlining third-quarter same-store sales growth that is expected to be slower than in the holiday quarter.

The primary reason for the whirlwind of negative news on earnings day for the company can be traced back to its ratio of inventory growth to sales growth in the first-quarter, where the company over-forecasted demand in the face of inclement weather.


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Macy’s reported second-quarter net sales of $6.26 billion, below the Bloomberg consensus forecast for $6.30 billion. Comparable-store sales including licensed departments increased 4%, or 3.4% when excluding licensed departments. Cautious spending by the U.S. consumer was evident in the components of Macy's same-store sales figures. Although the number of customer transactions rose 2.7% year-over-year, and average unit retail prices expanded 1.5%, units per transaction fell 0.3%.  "We had hoped that the number of transactions would have increased more," noted Macy's CFO Karen Hoguet on the earnings call.

Weaker-performing sales categories included women's and men's sportswear, and non-athletic shoes.  Hoguet referenced activewear from the likes of Nike (NKE) and Under Armour (UA) as on "fire," which hints at another sluggish quarter from yoga-apparel maker Lululemon  (LULU) when it announces its latest earnings results on Sept. 11. 

Earnings per share came to 80 cents, below analyst forecasts for 86 cents, caused primarily by a $22 million miss in operating income -- $571 million vs. Bloomberg consensus forecast of $593.2 million.

"We are approaching the second half of 2014 with confident optimism in our business strategies, merchandise assortments and marketing plans, tempered with the reality that many customers still are not feeling comfortable about spending more in an uncertain economic environment," noted Chairman and CEO Terry Lundgren.

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