Lower sales drag down Macy’s profit

Associated Press

NEW YORK

Lower sales dragged Macy’s profit down for the first quarter, highlighting the challenge for retailers as customers shift to more online shopping and store locations lose traffic.

Macy’s results fell short of Wall Street expectations, and the nation’s largest department-store chain warned sales will fall further this year. Its shares tumbled 14 percent, and gloom about the overall sector brought the shares of several other chains down as well.

“It’s a tough time to be a (department) store,” Citi said in an analyst note.

Rival Kohl’s also reported a drop in first-quarter revenue, but cost cuts helped boost profit, which topped expectations. Its shares fell nearly 6 percent.

The climate is a big challenge for Macy’s new CEO Jeff Gennette, who succeeded longtime Chief Executive Terry Lundgren in March.

Sales at established stores fell 5.2 percent, the ninth straight period of declines for the important metric. Macy’s, like other traditional department stores, has been hurt as online leader Amazon and off-price rivals like TJ Maxx take business away. Macy’s also has been closing stores as it tries to regroup as people make fewer visits to the malls where its stores are often an anchor.

Strength in categories such as women’s clothing, fine jewelry, fragrances, women’s shoes and furniture “was more than offset by persistent softness in handbags, fashion jewelry and watches,” analysts at Jeffries said.

Gennette said the company would invest to expand its digital and mobile business and continue integrating its online and brick-and-mortar experiences.

The Macy’s brand still has around 700 stores, though it has been aggressive about closings.