Please ensure Javascript is enabled for purposes of website accessibility

Why Macy's Dropped 15% in August

By Joe Tenebruso - Sep 11, 2015 at 11:54AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retailer's recent struggles may point to greater trouble ahead.

M Chart

M data by YCharts.

What: Shares of department store giant Macy's (M 2.27%) dropped by 15% last month, according to S&P Capital IQ data. Investors weren't impressed with Macy's second-quarter earnings release on Aug. 12, and concerns are increasing that the company's current struggles could be a sign of greater trouble ahead.

So what: Macy's second-quarter results came in below Wall Street's estimates. Sales declined 2.6% to $6.1 billion, driven by a 1.5% decline in same-store sales. Earnings per share fell 20% to $0.64 per share, compared to analysts' estimates for $0.76, and net income plummeted 26% to $217 million. The poor results also led Macy's management to reduce its 2015 full-year sales outlook to down 1% from 2014, compared to its previous guidance for a 1% increase in sales. 

During the subsequent earnings call, management stated that increased competition and changing consumer shopping trends took a toll on Macy's results.

Now what: Macy's is taking a multipronged approach to combat these issues. It's closing underperforming stores, building out its online and same-day delivery capabilities, and exploring ways to monetize its valuable real estate holdings.

Yet the core problem is that Macy's, like other primarily brick-and-mortar retailers, finds itself on the wrong side of a powerful trend: the relentless growth of e-commerce. Juggernaut Amazon.com continues to take share in the apparel market, and that's a trend that's likely to continue for the foreseeable future. As such, Macy's remains a high-risk investment.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Macy's, Inc. Stock Quote
Macy's, Inc.
M
$23.44 (2.27%) $0.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.