February 25, 2014 4:43 pm

Macy’s chilled by harsh US winter

Macy’s has become the latest retailer to fall foul of a brutally cold winter in North America, as the company blamed ice storms and plunging temperatures for flat sales and shuttered stores during its critical holiday quarter.

The US’s second-largest department store said comparable store sales rose 3.6 per cent in November and December, but overall sales for the fourth quarter slipped 1.6 per cent from a year earlier to $9.2bn. Macy’s said it had been forced to close up to 29 per cent of its combined Macy’s and Bloomingdale’s store base in the first two months of 2014 because of the inclement weather.

The decline in customer foot traffic continued to dampen overall sales performance until as recently as Valentine’s day before showing signs of recovery, said Terry Lundgren, chief executive.

“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalised pattern of shopping,” he said. The company said that the most recent set of earnings covered 13 weeks, while the prior year’s quarter covered 14 weeks.

Net income rose 11 per cent to $811m, or $2.16 per diluted share, a penny below Wall Street’s forecasts.

Macy’s is considered by industry observers to be one of the more resilient groups in the sector, thanks to a robust brand portfolio and willingness to experiment with digital and omnichannel strategies. Alongside Tuesday’s earnings announcement, Macy’s said it was rolling out to all its stores this spring an initiative allowing shoppers to buy online and pick-up in store.

The results come only four weeks after the company announced plans to cut 2,500 jobs as part of restructuring efforts to generate around $100m in yearly savings. The company said during its investors call that the earnings included an $88m charge as a result of this decision.

Macy’s reiterated its revised forecast from January for a profit of $4.40 to $4.50 per share and comparable sales growth of 2.5 per cent to 3 per cent in the fiscal year that started earlier this month.

Despite the retailer’s weaker-than-expected results, some analysts remained cautiously optimistic about its 2014 prospects.

“While the sales are clearly disappointing, Macy’s gross margins have remained intact and overall the company has outperformed numerous rivals who have produced some truly awful holiday results,” said Rahul Sharma, an analyst at Neev Capital.

Shares in Macy’s rose 5 per cent to $55.72 on Tuesday morning in New York.

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