The polar vortex strikes again. Its newest victim: Macy’s fourth quarter revenue, which dropped 1.6% compared to the same time in 2012 thanks to a fall in comparable store sales during the snowy month of January.
Macy’s reported $9.2 billion in fourth quarter revenue, a decline over the $9.35 billion reported the same time last year and just a hair under the $9.28 billion the Street was expecting. Though the quarter was one week shorter than in 2012 (13 weeks in 2013 against 14 weeks in 2012), Macy’s noted that comparable store sales grew 3.6% in November and December, but by the end of January, that comparable sales figure fell to 1.4%, almost entirely because of the weather.
“While we had expected a sales decline in January because of the calendar shift, the month was down further than we had expected and we are very disappointed with sales performance in January. In part, poor January sales were due to the unusually harsh winter weather across much of the country,” Terry Lundgren, Macy’s chairman, president and CEO said in a statement Tuesday morning. Lundgren noted that at one time or another in January, 244 Macy’s and Bloomingdale’s stores were closed because of the weather, and business “remained sluggish” through Valentine’s Day.
“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping,” he said. “But based on our experience in January and early February, we are watching business trends closely.”
The retailer’s fourth quarter net income grew to $811 million, up from $730 million in the prior-year quarter, resulting in earnings of $2.16 per share, including special items like tax expenses and asset impairment charges. Excluding those items, fourth quarter profit came in at $2.31 per share, well above analyst estimates of $2.17 per share.
On a full year basis, Macy’s revenue increased incrementally, coming in at $29.93 billion against the $29.69 billion reported for full-year 2012. Full-year comparable sales were up 1.9%, and full-year net income was $1.49 billion, an increase compared to the $1.34 billion reported in 2012. This resulted in full-year earnings of $3.86 per share, including special items (like taxes and that asset impairment charge); excluding special items, full-year profit was $4 per share.
Looking ahead to 2014, Macy’s reiterated the sales guidance it issued in January, saying that comparable sales are expected to grow between 2.5% and 3%, and full-year earnings per share will fall between $4.40 and $4.50. Macy’s did not reference the 2,500 job cuts it also announced in January, reiterating only that it has plans for new Macy’s stores in Sarasota, FL., Las Vegas and the Bronx.
Shares of Macy’s initially fell more than 2% in Tuesday’s pre-market activity, likely because of the bad news about January sales. Year-over-year, the stock is up 37.8%, and in a research note issued last week by Citi Research analyst Oliver Chen, the stock still has room to grow. Chen rated Macy’s as a buy and gave it a $63 price target – $10 higher than its Monday closing price – and said that not only does Macy’s have the best brand portfolio and a strong omni-channel approach (like its ship-to-store and ship-from-store delivery options), it also has a strong chance of success with the ever-elusive but much-desired Millennial contingent.
“Since 2012 Macy’s has applied a tailored approach to attract the lucrative Millennial customer, with the launch of Impulse and mstylelab,” Chen said. “We are anticipating big expansions in Millennial brands, which we believe will attract new junior and young adult customers.”
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