(Reuters) – Macy’s Inc (M.N) cut its annual profit forecast for the second time this year on Thursday, as the department store operator blamed weak international tourism and sluggish mall traffic for the first drop in same-store sales in two years.
Shares fell nearly 5% to $14.34 in premarket trading, as the company was the second major department store to cut earnings outlook this week after Kohl’s (KSS.N) ahead of the holiday sales season.
At a time when doubts about the strength of the U.S. economy are swirling, department stores and apparel retailers are grappling with a shift toward shopping more at big-box retailers like Target Corp (TGT.N) and Walmart Inc (WMT.N), as well as at online giant Amazon.com (AMZN.O).
Target on Tuesday posted another set of strong sales numbers and raised its full-year forecast, driven by demand for its apparel.
Comparable sales at Macy’s owned and licensed stores fell 3.5% in the third quarter ended Nov. 2, also due to a prolonged warm weather that hit demand for winter goods. Analysts had expected a 1% decrease, according to IBES data from Refinitiv.
“The sales deceleration was steeper than we expected,” Chief Executive Officer Jeff Gennette said in a statement.
A drop in international tourists, who are big spenders at Macy’s stores, is also pressuring sales.
However, Gennette tried to reassure investors of Macy’s preparations for the all-important holiday season, which kicks off next week.
The company has completed a revamp of about 150 stores with fresh interiors and better assortment of merchandise and expanded its off-price “Backstage” departments into more stores, he said.
It has also upgraded its website, he added.
Macy’s now expects 2019 adjusted profit of between $2.57 per share and $2.77 per share, compared with its previous forecast of between $2.85 and $3.05.
It also projected full-year total comparable sales to fall between 1% and 1.5%, compared to a previous forecast of up to a 1% rise.
Adjusted net income attributable to Macy’s shareholders fell to $21 million, or 7 cents per share, in the quarter, from $83 million, or 27 cents per share, a year earlier.
Analysts had expected the company to break-even on a per share basis.
Reporting by Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila