Macy's (NYSE:M), which analysts expected to shine among a series of lackluster retailer earnings reports this month, isn't so shiny after all. The department-store giant's sales dropped 0.8 percent from a year ago, the company reported on Wednesday (Aug. 14).
The chain turned a profit, which was 0.7 percent higher than a year ago. But in effect, customers just weren't buying—at least not at department stores. "We believe that much of our weakness is due to the health of the consumer and to the fact that consumers seem to be choosing to make purchases in non-department store categories such as cars, housing and home improvement," Macy's CFO Karen Hoguet told an earnings call.
The bad news didn't stop there. Same-store sales were down 0.8 percent, Macy's first comp decline since 2009. The sales weakness hit almost all product categories including shoes and cosmetics, Hoguet said, and stores had to mark down prices after a cool spring. Macy's didn't even seem to benefit from the fact that competitor JCPenney (NYSE:JCP) was essentially in a shambles for most of the quarter after firing its CEO, Ron Johnson, in April.
Hoguet said she was encouraged by early back-to-school sales this far in August (Macy's bad-news quarter ended on Aug. 3). But other retailers, some of whom started back-to-school promotions as early as June, have said that the season was off to a slow start, and one survey, from Integer Group, predicted that the number of potential back-to-school shoppers who plan to make do with what they've got is at 31 percent this year, up from 27.7 percent in 2012.
All this sounds like bad news for Macy's and worse news for any other retailers who aren't dollar stores, and that's the way it may play out. But late Wednesday, the New York Post reported that JCPenney had a "terrible, no question" July as well, according to anonymous sources—but for August, Penney's looks like it will actually do better than a year ago. If even JCPenney has bottomed out, maybe the rest of retail has too.
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