NEW YORK — Macy’s profit and sales slumped in the third quarter with many customers of the department store chain continuing to divert spending to basics like groceries as they deal with broadly higher prices.
The New York retailer which owns upscale Bloomingdale’s and the cosmetics chain Bluemercury raised sales expectations for the year, but lowered profit projections, sending shares plunging 10% before the opening bell.
Macy’s quarterly financial report was delayed after it discovered late last month that an employee intentionally hid as much as $154 million in company expenses over several years. Macy’s said Wednesday that its independent investigation of the incident is complete.
It found that the employee, who acted alone, hid $151 million in company delivery expenses. It said there’s no material impact to the company’s finances. It also said it was strengthening its existing controls and implementing additional changes designed to prevent a recurrence.
In the rough operating environment for Macy’s, activist investor Barington Capital Group this week asked Macy’s to develop a real estate subsidiary, reduce spending, and explore strategic options for Bloomingdale’s and Bluemercury chains, among other things.
Other large investors have tried to the same in the past as Macy’s has struggled with competition.
In July, the retailer cut off monthslong buyout talks with two investment firms, saying the bid was inadequate and the financing was not certain. Macy’s said Arkhouse Management and Brigade Capital Management failed to provide it with additional information by its June deadline, including the highest price they would be willing to pay. Macy’s named two directors to its board backed by Arkhouse in April, ending the takeover attempt and a push by the investment firms to replace most of its board.
Macy’s CEO Tony Spring arrive in February and announced a plan to close 150 stores, while upgrading another 350 stores.
The company said Wednesday it earned $28 million, or 10 cents per share, for the three-month period ended Nov. 2. That compares with $41 million, or 15 cents per share in the year-ago period.
Adjusted earnings was 4 cents per share, beating analysts projections by a penny, according to FactSet.
The company had already posted sales results late last month of $4.74 billion, slightly above the $4.72 billion Wall Street was expecting.
Comparable store sales fell 1.3%, better than the decline of 3.3% during the previous quarter.
Macy’s stores had a 2.2% comparable sales decline while Bloomingdale’s had a 2% increase. Same-store sales at Bluemercury rose 3.3%.
At the first 50 stores that Macy’s has overhauled, same store sales rose 1.9%.
The company now expects earnings per share to be $2.25 per share to $2.50 per share for the year, down from its previous estimate of $2.34 to $2.69. But it projected sales of $22.3 billion to $22.5 billion for the year, up from its previous forecast of $22.1 billion to $22.4 billion.
Macy’s is attempting to find a formula that works for its stores to reinvigorate sales. In the past year it has tested different tactics in dozens of stores, a strategy it has named the “First 50.”
“We are encouraged by the consistent sales growth in our Macy’s First 50 locations and the strong performance of Bloomingdale’s and Bluemercury,” Spring said in a statement. “Quarter-to-date, comparable sales continue to trend ahead of third quarter levels across the portfolio.”
