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Macy's Profit Drops 13% As Store Closures, Layoffs Take Their Toll

Macy's Profit Drops 13% As Store Closures, Layoffs Take Their Toll

Macy's and other traditional department stores like Kohl's, Nordstrom, JCPenney and Sears have all found it hard to compete with online retail giant Amazon, mass merchandisers like Walmart and Target and upstart fashion chains H&M and Zara.

When Macy's Inc. (NYSE: M) released its fiscal fourth-quarter financial results before the markets opened on Tuesday, the retailer said that it had $2.02 in earnings per share (EPS) and $8.52 billion in revenue.

Like fellow retailers Sears and Kmart, Macy's has been struggling to attract customers in a marketplace that is increasingly shifting toward online shopping.

In terms of guidance for the fiscal 2017 year, Macy's expects to see EPS in the range of $3.37 to $3.62 and total sales to be down between 2.0% to 3.0%, with comparable sales down 2.2% to 3.3%.

Up to Friday's close, Macy's shares had fallen 10 percent since it reported dismal sales for November and December, and announced store closures and job cuts. Comparable sales on an owned plus licensed basis for fiscal 2016 declined by 2.9%.

"While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit", said Terry Lundgren, Macy's chairman and CEO who will step down March 23 as chief executive and be succeeded by president Jeff Gennette. Adjusted earnings are expected between $2.90 to $3.15 a share, bracketing the average analyst estimate for $3.05 a share.

For the fourth quarter, ending January 28, Macy's booked sales of $8.515 billion, down 4% year over year from total sales of $8.869 billion in last year's fourth quarter.

"We know we must evolve our strategy and execute faster", Lundgren said.

"We also took a big step forward in rightsizing our physical footprint and restructuring our entire organization", said Mr. Lundgren.

Excluding impairments, store closings, settlement charges and other costs, per-share profit fell to $2.02 from $2.09.

Sales fell 4% to $8.51 billion, missing analyst estimates of $8.62 billion.

Gross margin expanded to 38.3% from 37.4%.

Meanwhile, there was speculation Hudson's Bay had approached Macy's regarding a takeover.

There was no mention of any discussions in Tuesday's report.

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