The Robust U.S. Dollar May Continue To Hobble Macy's

A strong dollar may be a sign of national pride, but it continues to wreak havoc on the sales of one of America's most iconic retailers.

"The dollar's strength will stay with us for a while, the headwind is not over, and will stay with the U.S. GDP story in 2016," said Macy's chairman and CEO Terry Lundgren at an investor conference Tuesday. Earlier on, Lundgren joked that "there aren't that many international customers hanging around New York of late."  

The dollar's strength continues to pressure the spending done by tourists to some of Macy's most important stores, such as its New York City flagship and those in Hawaii, Miami and Orlando. The U.S. Dollar Index has gained roughly 20% since mid-2014, reducing the spending power of overseas travelers.  

Last year, sales at the department store retailer fell 3.7% to $28.1 billion, hurt by the dollar's strength and weak sales of winter-related clothing amid record warm temperatures. Operating profits, excluding one-time items, plunged 20.1%. Macy's estimates the dollar's strength wiped a full percentage point from its comparable store sales results during the fourth quarter. Same-store sales fell 4.3% in the fourth quarter. 

Macy's expects total sales in 2016 to fall about 2% from the prior year. 

Lundgren isn't alone in anticipating another year of dollar strength that could hurt sales and profits of U.S. multinationals. 

"We remain in a structural bull market for the U.S. dollar, which has a further 10-15% to go [this year]," said Morgan Stanley analyst Andrew Sheets in a recent note. Goldman Sachs forecasts the U.S. dollar will rise 9% this year, prodded by the Federal Reserve resuming its rate-hiking campaign in June.

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