Macys to close 11 stores as December sales slip

US: Macys to close 11 stores as December sales slip 4%

By just-style.com | 8 January 2009

Department store giant Macy's Inc today (8 January) revealed plans to close 11 underperforming stores in 10 states and lowered its fourth-quarter earnings forecast after same-store sales fell 7.5% in November and December.

The Cincinnati based retailer, which operates 808 Macy's stores and 40 Bloomingdale's locations, said the closings were part of a normal process to prune underperforming locations.

"While new store growth has slowed in the current economy, our long-term strategy is to continue to selectively add new stores while closing those that are underperforming," said Terry J Lundgren, chairman, president and chief executive officer.

However, department store operators have been hit particularly hard as the economy sinks into a recession and consumers curb their spending or trade down to discount chains.

And Lundgren admitted the decision to close stores "often occurs when the market changes, new competing shopping centres are opened nearby to existing older ones, or when customers change shopping habits."

In its December trading update published today (8 January), Macy's said same-store sales were down 4.0%, and dropped 7.5% for the combined November-December period.

Total sales slipped 4.7% to $4.4bn for the five weeks to 3 January, from $4.6bn a year earlier.

For the 48 weeks of the fiscal year to date, Macy's sales are down 5.4% to $23.7bn, while same store sales are 4.6% behind last year's levels.

Looking ahead, it cut its earnings outlook to $1.10 to $1.20 a share from $1.30 to $1.50 a share, and said fourth quarter same-store sales would be down 7.5% instead of the 1% to 6% drop forecast earlier.

Costs associated with the 11 store closings will be $65m, most of which will be booked in the fourth quarter.

Sectors: Apparel, Retail

Companies: Macy’s