More stores close on poor Macy's Inc earnings
Macy's Inc (M) investors likely want to forget about most of 2017, but the stock has gained some traction in the past three months on investor optimism that the company could produce some relatively strong holiday shopping season numbers. On Thursday, Macy's announced yet another round of store closings as part of its cost-cutting initiative and disappointed investors with its updated holiday sales numbers and guidance.
Macy's closed 60 stores in 2017 and had previously announced it would be closing an additional 34 stores over the next several years. On Thursday morning, Macy's said 11 of those closures will be happening in early 2018.
The company reported a 1 percent gain in comparable-store sales in the months of November and December, suggesting Macy's business may at least be stable for the time being. However, that modest fourth-quarter gain wasn't enough to offset full-year sales declines. Macy's now expects full-year 2017 comparable-store sales to decline between 2.4 and 2.7 percent compared to its previous guidance of a decline of 2.2 to 3.3 percent.
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Macy's also boosted its full-year 2017 earnings per share guidance, excluding items, to a range between $3.59 and $3.69. Macy's narrowed its full-year sales guidance from a decline of between 3.2 to 4.3 percent to a new range of between 3.6 and 3.9 percent.
"Macy's had a solid holiday shopping season, and we are pleased that our November/December performance resulted in positive comp sales for the period, setting us up for a positive fourth quarter," CEO Jeff Gennette says.
Macy's also announced the 11 store closures will save roughly $300 million in costs, which the company plans to reinvest in the business.
Macy's says it plans to close an additional 19 locations as part of its previously announced plan to close 100 total stores. Macy's has closed 124 stores since 2015.
Despite signs of stabilization in the fourth quarter, Macy's investors were not impressed by the modest same-store sales gains and guidance hike. After a 3.7 percent decline on Wednesday, Macy's opened Thursday's session down another 5.6 percent.
"In the current retail environment, we believe department stores are structurally disadvantaged to win," Citi analyst Paul Lejuez says. "Several years of weak results at M has supported this thesis."
Citi has a "sell" rating and $16 price target for Macy's stock.
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