Why Macy's Inc. Stock Dropped Today

The department store chain fell after cautious comments from management.

Steve Symington
Steve Symington
Jun 6, 2017 at 5:20PM
Consumer Goods

What happened

Shares of Macy's Inc. (NYSE:M) declined 8.2% Tuesday after the company stated its fiscal second-quarter gross margin could arrive below expectations.

So what

Speaking during a scheduled investor meeting this morning, Macy's CFO Karen Hoguet noted that gross margin in the current quarter is now expected to drop roughly 60 to 80 basis points from the same year-ago period.  

Macy's store exterior


For perspective, last quarter Macy's gross margin slipped 100 basis points year over year, to 38.1%, due to a combination of ending fiscal 2016 with higher-than-expected inventory and weak sales trends in February, as well as margin headwinds stemming from promotional activity and competition in several business segments including beauty, housewares, and fashion watches. However, Macy's management also suggested those margin headwinds would wane as the company sped up its inventory turnover and accelerated sales of private-label brands like Martha Stewart and I.N.C.

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Now what

To be fair, Hoguet also noted today that Macy's can still achieve its full-year 2017 financial guidance, especially as the company continues its expense reduction efforts. But given its continued gross margin pressure amid the already difficult task of succeeding in today's tough retail environment, it's no surprise to see shares pulling back today.