Macy’s Profits Beats Estimates, but Sales Still in Decline

The department store chain, Macy’s Inc, has a long history of success in the United States but despite higher-than-expected quarterly profit the company continues to struggle. Indeed, perhaps the only reason the company managed to boost shares by 3.3 percent this week is that they sold some of its less-active stores and lowered some operating costs and taxes.

In spite of this profit, though, the company admits it will likely still post another year of sales decline. This is a trend that many traditional retailers are feeling, today, as consumers are turning to better prices and more convenience through the booming Amazon.com web retail portal.

Macy’s Chairman and Chief Executive, Terry Lundgren notes that that company is in the middle of a turnaround. He engineered this effort, of course, closing underperforming stores and dividing its real estate assets from its retail sector in order to provide more monetization opportunities through the remaining physical stores. Sure enough, the company shut down 66 stores last year and are looking at probably closing another 34 this year. Indicatively, the company expects total comparable sales to fall at least another 2 percent in fiscal year 2017, consistent with the 2.9 percent decline in 2016.

Macy’s has assets upwards of $21 billion, which has made the company quite the lucrative target for acquisition. As such, major Canadian retailer—and Saks Fifth Avenue owner—Hudson’s Bay Co has laid out an offer to buy up the company, just earlier this month.

Accordingly, GlobalData Retail managing director, Neil Saunders notes, “This monetization of assets provides Macy’s with a war chest that it can use to invest in improving its proposition. However, we believe that it is vital that this money is spent wisely and well. It should not be used in a piecemeal way to simply smarten up existing stores, but to overhaul the whole customer experience and to reinvigorate the Macy’s brand. This is the last chance saloon for Macy’s: if it gets this wrong, it will increasingly find itself without the resources to implement a decent turnaround and will begin a downward spiral into oblivion.”

And, with that in mind, Lundgren also responds, “This will give us a healthy physical portfolio,” putting emphasis on bricks-and-mortar stores that, he says, will remain integral to successful growth in the business, even as we move forward.

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