Macy's, Liz Claiborne report wider Q1 losses
NEW YORK -- Department store operator Macy'sm and apparel supplier Liz Claiborneliz both reported wider first-quarter losses Wednesday as they restructure their businesses 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 concern about consumers' willingness to spend, after some signs of improvement. A significant rebound in consumer demand would help end the recession.
The government report "continues to suggest that consumers remain under pressure," said Ken Perkins, president of RetailMetrics. "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 first-quarter outlooks on 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 18.5% decline in first-quarter profit from a year ago. That's better than an earlier estimate of a 25% 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% last month, much worse than the flat reading economists expected. The April weakness followed a 1.3% drop in March that was worse than first estimated.
Cincinnati-based Macy's posted a loss of $88 million, or 21 cents a share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents a share, a year earlier.
The results included restructuring charges of $138 million, or 5 cents a share related to consolidation of divisions and initiatives to tailor merchandise to local markets. Excluding those charges, the company lost 16 cents.
Revenue 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 a share on sales of $5.2 billion.
Department stores have been facing big challenges as shoppers cut spending. Macy's Chairman, President and Chief Executive Terry Lundgren said 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 localization efforts beginning in the fourth quarter 2009, and in the spring of 2010.
Macy's said in February that it was eliminating 7,000 jobs, almost 4% of its work force, and cutting capital spending, reducing its contributions to its employees' retirement funds and slashing its dividend.
The company also announced the national rollout of the localization plan, which began in some regions last year.
Macy's said in January — on the heels of the worst holiday season in decades — that it would close 11 stores, affecting 960 employees.
The chain reported last week that same-stores sales, or sales at stores open at least a year, fell 9.1% in April, steeper than analysts expected. Same-stores sales are considered a key indicator of a retailer's health.
Macy's said it is sticking with its forecast for fiscal 2009 sales to fall 6% to 8% and for earnings of 40 cents a share to 55 cents a share, excluding division consolidation costs. The company expects it will do better if the economy improves in the second half of the year. Analysts expect 64 cents a share.
Liz Claiborne's loss widened to $91.4 million, or 97 cents a share, from a loss of $31 million, or 33 cents a share, in the same quarter last year.
Excluding discontinued operations and one-time restructuring and impairment charges, the company posted a loss of 37 cents a share. That compares with an adjusted profit of 33 cents a share in the 2008 period. Sales tumbled 29% to $779.7 million.
Analysts polled by Thomson Reuters expected a loss of 23 cents a share on $884.3 million in sales.