The news just keeps getting worse for U.S. retail stocks. Macy’s Inc (ticker: M) stock plummeted more than 8 percent on Tuesday after Chief Financial Officer Karen Hoguet warned investors that the company will likely fall short of its projected gross margins forecast for the fiscal year ending January 2018.
The grim news from Macy’s dragged down several other major retail stocks as well. J.C. Penney (JCP), Kohl’s (KSS) and Dillards’ (DDS) all finished Tuesday’s session down more than 4 percent.
At Macy’s annual investor day event, Hoguet assured shareholders that Macy’s remains on target to hit its sales and income projections for the quarter. However, Hoguet says gross margins are trending between 60 and 80 basis points below last year’s level, and second-quarter margins are about 100 basis points below the same quarter a year ago.
Macy’s shares initially plummeted more than 15 percent in May after the struggling retailer reported earnings and revenue misses and said sales declined 39 percent from last year. Macy’s has been selling assets and closing stores in an effort to become more efficient. Declining margins seems to indicate the plan is not going smoothly.
Despite the margin contraction this year, the company expects to eventually be in a position to expand its gross margins for its apparel business.
In addition, Macy’s has been investing heavily in online sales and its discount division, Backstage. Discount retailers have performed relatively well so far in 2017, while many full-priced retailers have struggled.
Investors and analysts have blamed competition from e-commerce giant Amazon.com(AMZN) for Macy’s downfall, but the company said today that there is plenty of room in the retail space for both Macy’s and Amazon to thrive.
The fate of long-term investors now hinges on CEO Jeff Gennette’s turnaround plan. Gennette has set a goal for Macy’s to have at least 40 percent of its offerings be exclusive by 2020. Macy’s is also planning…
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