Macy’s Inc., which has department stores throughout Connecticut, reported wider first-quarter losses today as it restructures its business to adapt to a drop in consumer spending.
The results were released as the Commerce Department announced that retail sales fell for a second straight month in April, raising new concerns about consumers’ willingness to spend even after some signs of improvement. A significant rebound in consumer demand is integral for ending the recession.
“It continues to suggest that consumers remain under pressure,” said Ken Perkins, president of RetailMetrics LLC, of the government report. “They are forced to save more because their value of retirement funds have been devastated, the value of their homes continue to decline and unemployment continues to rise.”
Since the end of March, Perkins noted, retailers have raised their first-quarter outlooks amid signs of improving sales — a reversal of what happened since last fall when spending dropped off a cliff. Still, he expects the industry to post an overall 18.5 percent decline in first-quarter profits from a year ago. That’s better than an earlier estimate for a 25 percent decline, but “still awful”
“It’s all part of this ‘less bad’ phenomenon, but we still need to see some earnings growth and sales growth,” he said.
The Commerce Department said retail sales fell 0.4 percent last month, much worse than the flat reading economists expected. The April weakness followed a 1.3 percent drop in March that was worse than first estimated.
Cincinnati-based Macy’s posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier.
The results included restructuring charges of $138 million, or 5 cents per share related to the consolidation of divisions and initiatives to tailor merchandise to local markets. Excluding those charges, the company lost 16 cents.
Revenues fell to $5.12 billion from $5.74 billion a year ago. Analysts surveyed by Thomson Reuters, who generally exclude one-time items, were expecting a loss of 20 cents per share on sales of $5.2 billion.
Department stores have been facing big challenges as shoppers cut back their spending. Macy’s Chairman, President and Chief Executive Terry J. Lundgren said in a statement that the company expects its consolidation efforts to lead to about $400 million in expense savings each year beginning in 2010, after $250 million in the partial year of 2009.
The chain expects to see an improvement in sales from its localization efforts beginning in the fourth quarter of 2009, and particularly in the spring of 2010.
Macy’s said in February that it was eliminating 7,000 jobs, almost 4 percent of its work force, and cutting capital spending, reducing its contributions to its employees’ retirement funds and slashing its dividend. (AP)
