Macy’s unveils 2015 shopping list with $1.2bn growth budget after slow Q4

What can $1.2bn buy you? If you’re Macy’s, it will get international nameplates, new domestic store formats, and an aggressive off-price strategy as hunger for growth ensures the US department store giant continues to grab the headlines.

However, despite news that it will spend that $1.2bn this year alone, Macy’s saw its shares fall 3.2% Tuesday as investors ignored longer term promises to focus on more pressing issues, namely a lacklustre Q4 performance and a 2015 outlook that failed to excite. But more of that later.

Already with news this month of the $120m Bluemercury beauty buy under its belt, store consolidation, and a major focus on its omnichannel offer, Macy’s has now ramped up the programme to reinvent itself still further. That means it’s added an extra $100m to its investment outlay for 2015 in what it calls “a transition year”.

So what’s in the detail? Not much yet at this stage.

On international expansion, there will be both Macy’s and Bloomingdales banners abroad, although destinations and timing are not on yet the table. The retailer, however, believes its success in attracting foreign tourists to its major US stores gives it the brand recognition and cachet to lure these customers in their home countries.

A renewed off-price focus, the company said Tuesday, would not simply be Macy’s Outlet brand, since that might compete too closely with its Bloomingdale’s Outlet banner.

And don’t expect breakneck speed. The retailer said these new investments would take up to three years to bear fruit with CFO Karen Hoguet telling analysts: “We want to accelerate growth, but it needs to be profitable growth.”

Back to more pressing issues regarding its immediate future. For fiscal year 2015, Macy’s forecast earnings per share of $4.70-$4.80, total sales growth of just 1% to $28.39bn, although comps should rise 2% against a 0,7% rise in the previous year. Analysts expected earnings of $4.84 per shares on 2% total sales growth to $28.63bn.

Its results for the crucial Q4 to January 31 weren’t especially strong either, with profit dipping 2.2% to $793m. EPS rose to $2.26 from $2.16 due to a lower share count. Excluding restructuring and store closing charges, among other items, per-share earnings were $2.44. Revenue rose a lower than expected 1.8% to $9.36bn.

Analysts had expected $2.40 a share in earnings and $9.4bn in revenue.

Gross margin edged down to 40.3% from 40.6% a year earlier.

For the year, total sales rose just 0.6% to $28.1bn while same-store stores grew 2%, or by 2.5% when licensed departments are included.

Macy’s said it is hopeful that improvements in the economy, including lower gas prices, falling unemployment and a healthy stock market will benefit the retailer going forward.

However, Macy’s also said it is expecting that its sales and margins for the current quarter will be negatively impacted by disruptions at US West Coast ports

“Approximately 12% of our Q1 merchandise receipts are being delayed, and this will have some impact on our sales, gross margin and expense in the first few months of the year,” Hoguet said.

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