Macy’s Drops After Sales Unexpectedly Fall

Macy’s Inc. sank the most in more than eight months after cutting its forecast for earnings this year and posting second-quarter profit that trailed analysts’ estimates amid an unexpected sales decline.

Macy’s fell 4.5 percent to $46.33 at the close in New York for the biggest decline since Nov. 26. The shares have risen 19 percent this year compared with an 18 percent gain in the Standard & Poor’s 500 Index.

Chief Executive Officer Terry Lundgren used promotions to clear inventory that had built up as a cool spring curtailed purchases of summer clothing and the bumpy economy restrained consumers’ spending. Profit in the year through January will be as much as $3.90 a share, down from a previous forecast for a maximum of $3.95, the company said. Analysts estimated $3.95.

“It’s still pretty tough out there for middle-income consumers,” Brian Yarbrough, an analyst with Edward Jones & Co. in St. Louis, said in a telephone interview today. “If you look at the kinds of jobs people are getting, they are service jobs paying $9 to $12 an hour. They are spending on homes and cars, they are not spending on apparel.”

He recommends holding the shares.

Net income in the fiscal second quarter ended Aug. 3 rose 0.7 percent to $281 million, or 72 cents a share, from $279 million, or 67 cents, a year earlier, Cincinnati-based Macy’s, the second-largest U.S. department-store company, said today in a statement. Analysts projected 78 cents, the average of 19 estimates compiled by Bloomberg.

Sales Decline

Revenue slid 0.8 percent to $6.07 billion, trailing analysts’ average estimate of $6.25 billion. Sales at stores open at least a year fell 0.8 percent. Analysts estimated they’d rise 2.6 percent.

Sales were soft throughout the quarter, particularly in teen apparel and shoes, Chief Financial Officer Karen Hoguet told analysts and investors on a conference call today. “Budget-minded” consumers were likely behind the shortfall, she said. Macy’s also was too slow to mark down warm-weather goods, she said.

The second quarter was a “speed bump,” and Macy’s is confident it can manage its way through the tough consumer environment, she said. The retailer has increased its marketing, “turning up the volume” on the value it offers, to draw shoppers to its stores and website, Hoguet said. Current sales trends are currently “significantly better” and new product sales are encouraging, she said.

Same-store sales this year will rise 2 percent to 2.9 percent, more slowly than a previously projected increase of about 3.5 percent, the company said.

Macy’s gained 24 percent this year through yesterday, compared with a 19 percent rise in the Standard & Poor’s 500 Index.

Sears Holdings Corp., the largest U.S. department-store company by revenue, fell 1.4 percent to $41.57.