Macy’s (NYSE: M) had a lousy third quarter, but the company says it sees better days ahead. The struggling department store chain reported earnings per share of $0.17, down from $0.36 in Q3 2015. Sales came in at $5.6 billion, a drop of 4.2%, compared with sales of $5.874 billion in the same period last year.
“The trends we saw in the third quarter give us confidence that we can deliver our expectations for the fourth quarter and our guidance for fiscal 2016,” said CEO Terry J. Lundgren in the Q3 earnings release. “Our third quarter top line results were better than the first half of the year and our sales-driving initiatives continue to gain traction.”
Better guidance
While its Q3 numbers were not great, Macy’s raised its guidance for the rest of the year. That’s a strong statement on how the company feels about its turnaround efforts.
Macy’s, Inc. expects full-year 2016 comparable sales on an owned plus licensed basis to decrease in the range of 2.5% to 3% (compared with previous guidance of a decrease in the range of 3% to 4%), with comparable sales on an owned basis to be approximately 50 basis points lower. The company continues to expect diluted earnings per share (excluding asset impairment charges and retirement settlement charges) in fiscal 2016 to be in a range of $3.15 to $3.40.
That’s an improvement, but it still adds up to a forecast of falling sales. Macy’s is certainly not out of the woods yet.
What happens next?
Macy’s will have to hit or beat these numbers to convince its shareholders it’s going in the right direction. If it does that, Lundgren can get back to his long-range plan for putting the chain back on a growth path.
On a parallel track, the retailer has decided to work toward “creating value from its real estate assets.” To do that, the company has formed a strategic alliance with Brookfield Asset Management to explore value-creation opportunities in its real estate portfolio.
These are positive steps and signs that Macy’s may have future. The improved guidance may only be tiny move forward, but every bit helps, and the company’s assets (including is real estate) should give it some breathing room while it finds its footing.
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Daniel Kline has no position in any stocks mentioned.
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