Macy's Shares Drop After Missing Estimates

Investors dump stock after retail giant cuts sales outlook for 2014.
3:41 | 08/13/14

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Transcript for Macy's Shares Drop After Missing Estimates
-- I'm Dan -- York and as a financial markets close on Wall -- put this Wednesday August 13. This story stock and -- the store today Macy's. Retail giant doing too well lowering forecasts missing estimates disappoint investors all the round. So explain about what is happening on Macy's corporate -- -- -- finance so -- what's going on. Well then you he said -- they missed they missed on earnings and they've they've missed on same store sales which is a key metric for any retailer. And they lower their guidance. For sales for the second half of the year. And and I think it's all about expectations on Wall Street as it wasn't that it was a bad quarter. And of itself a relative to what the street was looking for. It was -- -- -- -- you saw the stock got hammered a day when otherwise the overall market did pretty well which makes it even worse in relative terms let's talk the fact that investors were upset at the sort of marketing tactic that Macy's has been putting out about. Putting out too many sales to bring people that. Right I mean it's a catch twenty because -- have to get people in the stores and doing sales as is -- way to do that but. If you do you too much discounting. That hurts your margins hurt your bottom line they're gross margin. Fell to U was number 41 point 4%. The expectation was for 41 point 8%. Again it seems like a small. Change but again worse -- -- -- was looking for and this the concern is that if you get the consumer accustomed to -- these big discounts that you can never wean yourself or your customer offer them. And that over a long period of time will hurt your profitability as the retailers are very -- to -- if you -- maybe put a paradigm comparison to. Easy money on Wall Street the same time right -- -- kind of used to that. Well sure yeah exactly -- right now that the Fed is at zero. And so it -- at some point in our lifetimes I expected the Fed Funds rate is gonna go up. And maybe it'll be 1% which would still be very low but relative to zero it's gonna see Michael -- and -- right now -- things are so tough right so. You know again Macy's -- of well run retailer. Terry -- is one of the best operators in the business they've done very well in recent years so the bar was just said. Much higher for them. And they didn't hit it. Ponytail look at -- to -- chart walk me through this how they do. Right well they they didn't do well as you can see immunity on the stock pretty much -- took a nosedive this morning -- is there. -- earnings came out and they warned again in the second half of the year. This document of them up about 12% -- -- In this environment. You know when you've done well. The -- Is on unique even higher that -- the wants -- to keep moving the goalposts on you and if you don't make it. It -- you're gonna see result what you saw today what about the retail industry in general as far as summer sales -- -- line. Right well and we also got the July retail sales numbers today from the government which showed retail sales were flat. In the month of July which again also weaker than expected that consensus -- for a gain of zero point 2%. Excluding autos was also much weaker than expected and the bottom line is that the US consumer is still strapped. Even. As the on the -- comes down in overall economy seems to be doing better from a macroeconomic perspective. Wii's growth -- isn't there are so US consumers are are holding tight to their wallets and you saw that -- Macy's results and numbers right there and test -- finance on this Wednesday and thanks so much appreciated him. You much in -- stock Stewart abcnews.com. Headlines Dan York.

This transcript has been automatically generated and may not be 100% accurate.

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