Department store Macy's Inc. and clothing maker Liz Claiborne reported wider losses for the first quarter on Wednesday because of charges tied to changes they are making as they try to streamline and respond to how people are shopping in the recession.
Though both companies said business isn't getting worse, their CEOs acknowledged that spending will likely remain weak throughout the year. Terry J. Lundgren, Macy's chairman, president and chief executive, said that even as the chain cuts inventories to be in line with weak demand, it may have to keep slashing prices throughout the year to get nervous shoppers buying again.
"We're going to do what we have to do to be competitive and _ and with the way that the consumer (has) reacted for the last several months, we're not ready to say ... she's back in the stores and ready to buy yet," Lundgren told investors during a conference call.
The financial results came as the Commerce Department said retail sales fell for a second straight month in April, raising new concerns about consumers' willingness to spend even after some hopeful signs. A significant rebound in spending is integral for ending the recession.
"It continues to suggest that consumers remain under pressure," Ken Perkins, president of RetailMetrics LLC, said of the government report.
Since the end of March, Perkins noted, retailers have been raising their first-quarter outlooks _ a reversal of what happened since last fall when spending dropped off a cliff. Still, he expects to see an overall 18.5 percent decline in retailers' first-quarter profits compared to a year ago. That's better than an earlier estimate of 25 percent, 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.
Macy's shares fell almost 7 percent, or 83 cents, to $11.52, while Liz Claiborne's stock dropped more than 26 percent, or $1.51, to $4.26.
The Commerce Department said retail sales fell 0.4 percent last month, much worse than the flat reading economists expected. That followed a 1.3 percent drop in March that was worse than first estimated. Demand at department stores and general merchandise stores fell 0.1 percent and sales at specialty clothing stores dropped 0.5 percent.
Macy's posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier. Excluding restructuring charges, the company lost 16 cents per share.
Revenues fell to $5.12 billion from $5.74 billion a year ago. Same-store sales, or sales at stores opened at least a year, fell 9 percent.
The chain expects to see sales improve because of its efforts to tailor its merchandise to local markets beginning in the fourth quarter of 2009, and particularly next spring.
Macy's announced in February that it was eliminating 7,000 jobs, almost 4 percent of its work force. It had said in January _ on the heels of the worst holiday season in decades _ that it would close 11 stores, affecting 960 employees.
While Macy's executives say they are seeing benefits from its restructuring efforts, business is still tough. Macy's stuck with its forecast that fiscal 2009 sales will fall between 6 percent and 8 percent and for earnings of 40 cents per share to 55 cents per share, excluding division consolidation costs.
Liz Claiborne, a supplier to department stores like Macy's, posted a loss of $91.4 million, or 97 cents per share, in the first quarter. That compares to a loss of $31 million, or 33 cents per share, a year ago. Excluding restructuring charges, the loss was wider than analysts had expected. Sales tumbled 29 percent to $779.7 million.
Claiborne announced a major restructuring in 2007 to focus on fewer but more powerful brands like Juicy Couture. But since the economy tanked in September, it accelerated cost-cutting, including job cuts.
CEO William McComb told investors he has been pleased with how consumers are responding to the relaunched namesake brand, now under the design direction of Isaac Mizrahi. But stores are still cutting inventory by an average of 20 percent this year, company officials said. And while customer traffic is stabilizing, it's still 15 percent to 20 percent below year-ago levels.
"We see the environment as still fundamentally promotional, with a reserved consumer and significantly reduced traffic," McComb said.
____
AP Business Writer Bree Fowler contributed to this report.
Terms & Conditions
RSS Headlines
Fool UK