Updated from 10:58 a.m. with comments from Macy's chairman and CEO Terry Lundgren.
Macy's (M) had another sluggish quarter and offered up a worrying outlook for the holidays, but did manage to detail three things that may intrigue investors.
On Wednesday, the department store retailer reported third quarter earnings of 56 cents a share excluding one-time items, narrowly beating forecasts for 54 cents a share. Comparable store sales, which are sales from stores open longer than a year, fell by 3.6%. The sales result was worse than the second quarter, when same-store sales declined by 1.5%.
Macy's highlighted continued tepid spending by U.S. consumers in certain apparel and accessories departments. International visitors, who have visited Macy's biggest tourist stores less frequently this year due to their weaker currencies vs. the U.S. dollar, also continued to shop cautiously.
"Consumers are spending on things like home improvement items, tech downloads and eating out at restaurants -- plus they continue to have a fairly big savings account," explained Macy's chairman and CEO Terry Lundgren in an interview with TheStreet as to why sales continue to be soft.
The lackluster third quarter results, fueled in part by weak store traffic, caused Macy's to offer a dour outlook for the approaching holiday season. Macy's now expects earnings in a range of $4.20 to $4.30 a share excluding one-time items, compared with its previous guidance in the range of $4.70 to $4.80 a share.
Same-store sales are forecasted to decline 1.8% to 2.2% for the year, compared with previous guidance of approximately flat. In the fourth quarter, same-store sales are seen dropping 2% or 3%.
Macy's shares plunged more than 13% to $34.92 in early trading on Wednesday.
In spite of its struggles, Macy's did discuss several things that could boost profits and returns for shareholders longer term. TheStreet takes a look at three of them.
1. More store closures could be coming.
As previously announced in September, in early 2016 Macy's will close 35 to 40 under-performing stores out of its current portfolio of about 800 Macy's and Bloomingdale's locations.
On Wednesday, Macy's suggested it's not yet done shuttering stores in order to more profitably run the business in the age of digital commerce, saying in a statement that it "expects it will continue to reduce the number of stores over time." Lundgren was non-committal when asked about the optimal size of Macy's store network in the the future.
"I don't have an exact number, but it's less than today," said Lundgren, adding the rise of digital shopping makes it less essential for Macy's to operate stores so close to one another.
According to Lundgren, it's now important to get more productivity from Macy's top locations, as opposed to operating a wide network of stores. One way Macy's plans to focus on getting people into its stores, says Lundgren, is by opening more shops that offer unique merchandise or some form of service.
An example is the deal Macy's announced Wednesday with Luxottica to open 500 LensCrafters optical shops inside the department store retailer's stores. The first LensCrafters will open at a Macy's location by April 2016, with 100 scheduled to open by the end of the year.
In recent years, Macy's has also added shops from shoe retailer Finish Line (FINL) and toy retailer Build-A-Bear (BBW) . In September, Macy's struck a deal with electronics retailer Best Buy (BBY) to operate shops inside its stores.
With fewer under-performing stores in the mix, and more productivity at the best locations, Macy's profits could receive a nice boost once sales recover.