Macy’s poor Christmas sales have caused the struggling department store to cut its profit guidance, with its business woes sparking an industry-wide wipeout.
Despite a strong start to the holiday season, positive sales results during Black Friday and Cyber Monday weren’t enough to get Macy’s across the line, as it experienced weaker-than-expected performance during December. According to Jeff Gennette, the chairman and chief executive of the US-based chain, sales weakened in mid-December.
“We experienced another period of double-digit growth in our digital business and continued strength in the Growth50 stores. The holiday season began strong – particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas,” Genette said.
“In the holiday period, we saw strong performance across a number of categories (fine jewelry, women’s shoes, fragrance, dresses, outerwear, active and home),” he continued. “This sales growth was largely offset by: underperformance of other categories (women’s sportswear, seasonal sleepwear, fashion jewellery, fashion watches and cosmetics); temporary fulfilment challenges following the fire in our West Virginia distribution centre; and underestimation of the impact of changes to our pre-Christmas earn & redeem promotional event.”
Shares in Macy’s dropped by as much as 17.7 percent after news of its downgraded profit guidance broke, marking its biggest one-day sell-off on record. Its decision to cut its sales and earning guidance came less than two months after the business upgraded it.
“We are revising the guidance we provided in November and will continue to take the necessary steps in January to ensure a clean inventory position as we enter fiscal 2019… Our revised guidance is above the expectations we set at the start of the fiscal year, and we expect to deliver our fifth consecutive quarter of positive comparable sales, including ‘comping the comp’ of the 2017 holiday season.”
In November 2018, Macy’s increased its guidance from plus one percent to +2.3 to 2.5 percent. This has now been dropped to expected positive growth of roughly two percent.
In light of Macy’s woes, Bloomberg has reported that as much as US$34 billion of value was wiped from the market, as the value of Macy’s competitors in the US also took a hit. Even Target, who recorded a 5.7 percent increase in like-for-like sales for the quarter got caught in the sell-off, losing 2.9 percent of its market value.
Analysts have since asked the question: how are bricks-and-mortar retailers that are slow to make the shift to online really fairing in the digital world? Other retailers recording weak December results include JC Penney, whose shares fell 4.5 percent after reporting a 3.5 percent drop in underlying like-for-like holiday season sales.
Before Christmas, retailers had been expecting a strong sales period, with less post-November discounting and higher price points. However, the increase in stock levels over what’s traditionally the biggest trade period for traditional and online retailers has hit bricks-and-mortar chains hard.
Australia has been feeling similar pressure building, with November and December sales results expected to drop at 11.30 am on Friday December 11. Analysts are predicting poor results; higher trade during online sales events like Cyber Monday and Click Frenzy paired slower December performance.