Macy’s Inc. swung to a loss in the third quarter as sales dropped more than 7 percent amid a sharp slowdown in consumer spending.
The department store operator — one of the nation’s biggest — also said Wednesday it slashed its budget for 2009 capital expenditures by almost half as it navigates the deteriorating economy.
Still, the Cincinnati-based chain reiterated its profit outlook, adding it would be at the lower end of the range if current sales trends continue.
Macy’s said it lost $44 million, or 10 cents per share, in the quarter, after a profit of $33 million, or 8 cents per share, a year earlier.
Excluding costs related to the consolidation of three regional divisions that totaled $16 million — $10 million after tax or 2 cents per share — the third-quarter loss was 8 cents per share.
The company said sales fell to $5.49 billion from $5.9 billion a year earlier. Analysts surveyed by Thomson Reuters were expecting, on average, a loss of 19 cents on $5.49 billion in sales.
“Macy’s Inc. remains financially healthy,with strong cash flow, a solid balance sheet and ample borrowing capacity. We are committed to continuing to aggressively manage expenses and inventories consistent with planned sales levels,” said Terry J. Lundgren, chairman, president and chief executive in a statement.
Lundgren added that even in what he describes as a “poor economic environment,” he’s confident in the company’s strategies for gaining market share, particularly as its effort to localize stores more is yielding “promising early results.” He expects that strategy to have a more profound impact in 2009.
Macy’s announced a reorganization in February that dispersed more managers to local markets. As part of the plan, the company combined three regional divisions and slashed about 2,300 management jobs. Meanwhile, to differentiate itself from its rivals, Macy’s is expanding its offerings in exclusive merchandise.
This past fall, it became the exclusive department store retailer for Tommy Hilfiger U.S.A. men’s and women’s sportswear. It also has a partnership with FAO Schwarz to open toy stores in close to 700 Macy’s stores across the country; about 75 full-size FAO toy stores have opened in the department store chain this fall.
Macy’s has reduced its budget for 2009 capital expenditures from approximately $1 billion to a range of $550 million to $600 million. That compares with about $950 million in 2008.
Macy’s expects earnings in the range of $1.30 to $1.50 per share this year, and $1.10 to $1.30 per share in the fourth quarter. Analysts surveyed by Thomson Reuters forecast $1.37 per share for the year, and $1.24 per share in the fourth quarter.