Another day, another guidance cut by a retailer, this time from Macy"s which during its investor meeting, warned investors that the company"s gross margin could be below the forecast given just this part February, some 60-80 basis points lower.
According to Fly on the Wall, Macy’s CFO Karen Hoguet said at investor day that the gross margin for the fiscal year ending January 2018 is trending 60bps-80bps below FY17, with the 2Q rate ~100bps below 2QFY17. One possible explanation: liquidation of excess inventory as the company is unable to sell enough product per planned prices. Indeed, this was confirmed moments ago by a statement made on the investor call:
- MACY"S INC EXEC SAYS NOT SATISFIED WITH INVENTORY LEVELS IN STORES
The silver lining: Macy’s, at least for now, reaffirmed its FY18 sales and EPS forecast, and said it plans for exclusive product to reach 40% by 2020.
Some other details from the investor meeting per Bloomberg:
- Macy’s says it can expand gross margin on apparel side of business over time, but can’t say when beauty margin will grow: mgmt speaking at investor day.
- Excess inventory, beauty markdowns hurt margin forecast
- There is a place for both Amazon, Macy’s to succeed
- Hoping to scale Backstage next year; beauty working very well in Backstage, partly due to bath & body; home products also working
- Herald Square property getting more valuable
- Ralph Lauren, Michael Kors are part of M’s power brands; they may be having trouble right now, but confident they will turn, just like Tommy Hilfiger did
- Nothing in forecast that is counting on traffic changing from current trends
- Buy online/pickup in stores capability will be available by year end
- Looks at product every day with an eye towards "editing" SKUs
- Not satisfied with inventory turns
The market did not take the warning in stride, and M stock has tumbled to session lows, down as much as 5% to lowest intraday since mid-May.
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