Macy’s suffers biggest plunge in a decade on profit warning

Macy’s plunged its most in more than 10 years after the department store chain cut its annual profit and sales forecast, saying its sales momentum during the holidays weakened in mid-December.

Comparable sales will grow about 2 per cent, down from a previous outlook of at least 2.3 per cent, the company said in a statement on Thursday. Profit will be as much as $4 a share. It had previously forecast as much as $4.30.

With Thursday’s slide, the company erased its entire 2018 gain. The report sparked a slide in retail stocks, with the S&P 500 retail index dropping 1.94 per cent, and dragged down rival retailers Kohl’s and Target.

Cosmetics

Macy’s cited underperformance in categories such as women’s sportswear, fashion jewellery and cosmetics. It also said it had some issues fulfilling orders after a fire at its West Virginia distribution centre.

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"The holiday season began strong – particularly during Black Friday and the following Cyber Week – but weakened in the mid-December period and did not return to expected patterns until the week of Christmas," chief executive Jeff Gennette said.

Macy’s emerged from a lengthy slump last year by improving its e-commerce sales and bringing in new loyalty members. Investors may be concerned that the performance of recent quarters will prove unsustainable, however, as consumer preferences continue to shift rapidly.

The shares fell as much as 18 per cent to $25.90, the biggest intraday decline since October 2008. Macy’s climbed 18 per cent last year, compared with a 6.2 per cent drop in the S&P 500 Index.

– Bloomberg