US’s largest department-store chain Macy’s has triggered fresh fears within the country’s retail market, with its unexpected drop in quarterly sales, which is being considered as the worst quarterly sales since recession.
Eventually, the chain has also slashed its full-year forecast, sending the retail market in a tizzy over its future health in the midst of a fast reducing demand for clothing. The company’s shares dropped to the lowest since 2008 (a dip of 15 per cent) on Wednesday, even as other apparel makers, mall owners, luxury brands and rival chains plunged into a massive sell-off.
“We are not counting on the consumers to spend more,” Chief Executive Terry Lundgren said on Wednesday, while Chief Financial Officer Karen Hoguet said, “We’re, frankly, scratching our heads.” They are unable to crack the secret behind why people were not spending on clothes, even though people are earning more and saving more, as well as the employment rate has also been steady for a while now. Apparently, the e-commerce market is booming and in turn pushing retail and department chains like Macy’s out of the competition, in spite of the fact that these retailers have shut down their ill-performing stores and opened online retail platforms instead.
“Clearly, our industry is in something of a rough patch,” Hoguet stated. “We know we are not alone,” she said without mentioning “others” like Aéropostale Inc, Gap Inc and Sports Authority Inc.
The recent surge in e-commerce sites and their highly competitive strategies have posed a threat Macy’s margins through the year. “The competitive environment has become a lot more promotional,” Hoguet said. “I think part of this is a result of the Internet, where every promotion happens across the country immediately.”
The company is currently changing its strategy in hopes to turning things around for the rest of this year, although CEO Lundgren said he expects these weak consumer-spending trends to continue till the end of 2016. Its strategies would include intensifying cost cutting and monetizing unproductive real estate.
Being the first major retailer to disclose results for the start of the year, its store sales — excluding locations opened or closed over the past year — fell by 5.6 per cent in April-ended quarter, the 5th straight decline, and considered to be its worst quarterly performance since the second quarter of 2009.
It is expected that Kohl’s Corp., Nordstrom Inc and JC Penney Co will also face the same fate very soon.
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