Macy's Massacre: Thousands Fired; Guidance Slashed (Again); Weather Blamed

Tyler Durden's picture




 

It was less than two months ago when we brought to you the "Macy's Massacre": on November 11, the stock of the iconic retailer crashed 13% and its CDS soared after Macy's announced a trifecta of weak data, reporting a miss on Q3 sales which came at $5.87 billion below the $6.1 billion expected, down from the $6.2 billion, as well as a plunge in comparable store sales which tumbled by 3.9%, far worse than the expected drop of -0.4%, and nearly three times as bad as the 1.4% drop a year ago.

Cash flow plunged: cash provided by operating activities was $278 million in the first three quarters of 2015, compared with $841 million in the first three quarters of 2014.

Finally, M also slashed its full year same store guidance down from flat to -1.8% to -2.2% with sales projected to drop -2.7% to -3.1%, compared to a previous guidance of -1%, as contrary to the propaganda, the discretionary spending of the US consumer is bad and getting worse by the day.

Fast forward to today when the massacre is back with a vengeance, after the company not only reported yet another cut in its guidance, but also announced it would be laying off another boatload of retailers, demonstrating just how strong the "service" economy truly is.

First, Macy’s said that its comparable sales on an owned plus licensed basis declined by 4.7% percent in the months of November and December 2015 combined, compared with the same period last year. This compares to previous, already poor guidance, of -2% to -3%. The weather was, of course, blamed.

“The holiday selling season was challenging, as experienced throughout 2015 by much of the retailing industry. In the November/December period, we were particularly disadvantaged by the historically warm weather in northern climate zones where both Macy’s and Bloomingdale’s are especially well-represented. About 80 percent of our company’s year-over-year declines in comparable sales can be attributed to shortfalls in cold-weather goods such as coats, sweaters, boots, hats, gloves and scarves. We also continued to feel the impact of lower spending by international tourists as the value of the dollar remained strong,” said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.

Compare this to Macy's 8-K from precisely two years ago, and try not to laugh too hard:

"poor January sales were due to the unusually harsh winter weather across much of the country. Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping."

So much for the comedy, now back to the tragedy for shareholders, as the company admits not even "harsh cold weather" can save it as it slashes earnings guidance...

Macy’s, Inc. is not expecting a major change in sales trend in January and expects a comparable sales decline on an owned plus licensed basis in the fourth quarter of 2015 to approximate the 4.7 percent decline in November/December (from previous guidance of down between 2 percent and 3 percent for the fourth quarter). This calculates to guidance for comparable sales on an owned plus licensed basis in the full-year 2015 to decline by approximately 2.7 percent (from previous guidance of down 1.8 percent to 2.2 percent).

 

Earnings per diluted share for the full-year 2015 now are expected in the range of $3.85 to $3.90, excluding expenses related to cost efficiencies announced today and asset impairment charges associated primarily with spring 2016 store closings. This compares with previous guidance in the range of $4.20 to $4.30. Updated annual guidance calculates to guidance for fourth quarter earnings of $2.18 to $2.23 per diluted share, excluding charges associated with cost efficiencies and store closings. This compares with previous guidance for earnings per diluted share of $2.54 to $2.64 in the fourth quarter. Earnings guidance for 2015 includes an expected $250 million gain on the sale of real estate in downtown Brooklyn.

... and a tragedy for its employees, many of whom are about to be fired.

Macy’s, Inc. today announced a series of cost-efficiency and process improvement measures to be implemented beginning in early 2016 that will reduce SG&A expense by approximately $400 million while still investing in growth strategies, particularly in omnichannel capabilities at Macy’s and Bloomingdale’s. The actions represent progress toward the company’s previously stated goal of re-attaining over time an EBITDA rate as a percent of sales of 14 percent.

To address the need for greater efficiency and productivity, among the changes being implemented by Macy’s, Inc. in early 2016 are:

  • Adjusting staffing levels at each Macy’s and Bloomingdale’s store in line with current sales volume to increase productivity and improve efficiency. An average of three to four positions will be affected in each of Macy’s and Bloomingdale’s approximately 770 going-forward stores (out of an average workforce of approximately 150 associates in each store), for a total of about 3,000 affected associates nationwide. Roughly 50 percent of affected store associates are expected to be placed in other positions.
  • Implementing a voluntary separation opportunity for about 165 senior executives in Macy’s and Bloomingdale’s central stores, office and support functions who meet certain age and service requirements and chose to leave the company beginning in spring 2016. Approximately 35 percent of these executive positions will not be replaced.
  • Reducing an additional 600 positions in back-office organizations by eliminating tasks, simplifying processes and combining positions, with about 150 of these associates reassigned to other positions.

Luckily, the US service economy is so very strong as Macy's results confirm, or otherwise someone might get the idea that the "manufacturing recession is not contained."

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Wed, 01/06/2016 - 21:16 | 7008222 BarkingCat
BarkingCat's picture

"As a business you are doing something wrong if you actually blame the weather for your poor performance "

 

Unless you are selling sunblock in the tropics and suddenly it rains the entire season.

Wed, 01/06/2016 - 16:50 | 7006838 yogibear
yogibear's picture

They can shorten unemployment insurance  from 26 weeks to 2 weeks and have the unemployment rate drop to less than 1%.

After your 2 weeks of collecting unemployment insurance your no longer unemployed your considered discouraged.

Wed, 01/06/2016 - 16:50 | 7006843 katchum
katchum's picture

4% unemployment, here we come.

Wed, 01/06/2016 - 16:50 | 7006844 homiegot
homiegot's picture

Too hot. Too cold. Next year it'll be because of solar flares.

Wed, 01/06/2016 - 17:03 | 7006919 AMPALANCE
AMPALANCE's picture

You forgot too radioactive.

Wed, 01/06/2016 - 18:02 | 7007247 Kprime
Kprime's picture

there is a drought in sales

Wed, 01/06/2016 - 16:51 | 7006848 NEOSERF
NEOSERF's picture

So unless there is Goldilocks weather for 60 straight days from November 1 of 31.5 degrees, slightly overcast across 35 of the 50 states, Macys will miss its numbers...hope the analysts have that calculation in their spreadsheets.

Wed, 01/06/2016 - 22:08 | 7008539 Freedumb
Freedumb's picture

NEOSERF, good observation, us pros here know that you also need a light, gentle breeze, perhaps prevailing from the southwest for the eastern half of the country, along with a relative humidity around 40-70%. Too dry or too moist conditions are awful for the skin and even more awful for the economy.

Wed, 01/06/2016 - 16:53 | 7006864 Blankenstein
Blankenstein's picture

Went to one before Christmas last year.  The store used to be a Marshall Field's and was nice.  Now parts of the store looked just a step or two above Walmart. Some of the clientele was kind of sketchy too.  Might have been because it was right before the holiday or maybe just a sign of our descent into a third world country.  

Wed, 01/06/2016 - 16:55 | 7006877 directaction
directaction's picture

What's a Macy's? 

Wed, 01/06/2016 - 17:07 | 7006949 AMPALANCE
AMPALANCE's picture

A former retail Corporation who also though they could pay their workers nothing. and still have customers. They never realized employees = customers. The race to the bottom, believe it or not, ends at the bottom.

Wed, 01/06/2016 - 16:57 | 7006887 drivenZ
drivenZ's picture

Well you either make up a short term problem or you admit the business model is dying a slow death. I don't blame them, what are you going to do? This is less a reflection of the economy and more a reflection of the environment for big box stores.

Wed, 01/06/2016 - 17:01 | 7006910 silverer
silverer's picture

Prepare for holographic parades from here on out.

Wed, 01/06/2016 - 17:02 | 7006913 Seasmoke
Seasmoke's picture

We have a mall with Macy's. Sears. And JC Penney. It literally feels like death when you are in there. And no one seems to notice. No one says a fucking thing. 

Wed, 01/06/2016 - 17:05 | 7006936 NEOSERF
NEOSERF's picture

No one says a thing because if you speak the walking dead salespeople might sense your presence and ask if they can help you which is funny anyway because all I want is an avacado color fridge.

Wed, 01/06/2016 - 21:01 | 7007212 Kprime
Kprime's picture

it may be time to update your kitchen.  when you do keep in mind the avocado green and harvest gold refrigerators ran for 40+ years.  you will only get 3-4 years out of the new super deluxe digital refrigerators which will be reporting your every move to the NSA.  this will happen whether you plug them into the internet or not; they have direct communication to NSA spy satellites.  they want to monitor how many hot dogs you eat.  hot dogs signal your inner terrorist to activate once you have consumed the secret number of hot dogs. allah akbar with mustard.

Wed, 01/06/2016 - 21:46 | 7008386 WillyGroper
WillyGroper's picture

mine is hard soldered to the circuit board.

the new ones have a ribbon cable.

unplug the thing.

Wed, 01/06/2016 - 19:17 | 7007562 o r c k
o r c k's picture

You actually saw some salespeople ?

Wed, 01/06/2016 - 17:14 | 7006980 AMPALANCE
AMPALANCE's picture

JC Penney and K Mart(Meximart) are done here, and going to the mall here is like going to a homeless mans funeral in a ghetto called Pajammy Land. Sears is somehow holding on despite a new Super Walmart across the street.

Wed, 01/06/2016 - 17:03 | 7006920 NEOSERF
NEOSERF's picture

Yeah, whatever...just don't touch the parade (which with product endorsements probably makes them money every year even with the tremendous police costs etc which is why they defer in breaking out the cost (profit) of the parade).

Wed, 01/06/2016 - 17:05 | 7006925 herkomilchen
herkomilchen's picture

Whether this is just Macy's or a broader thing is unknown.  But this is exactly what the beginning of the recession will look like.

0% interest money abnormally signals to producers that consumers have massive amounts of savings.  Factories start churning out more goods and retailers build out stores in marginal neighborhoods and hire like mad.  But it's a fake-out. Consumers, who can't get any yield, actually have even less money saved than they would at normal interest rates.  So expected sales never materialize.  Factories and retailers slash operations, fire people, and default on debt.  Recession commences.

Wed, 01/06/2016 - 17:10 | 7006958 moonmac
moonmac's picture

Sucks buying clothes at Macy's then seeing it half price at TJ Max a week later after you took the tags off.

Wed, 01/06/2016 - 17:14 | 7006981 Seasmoke
Seasmoke's picture

Here's how bad Macy's is today. In college I shopped nowhere else for my clothes. Mostly Polo. Because I was a cool cat. 

Anyway haven't shopped there in years. But for Christmas someone got me a Redskins on field hybrid pullover. Sweet jacket but wrong size. They tell me they only paid $25 with $85 price tag but try and return it anyway. Macy's comes up with $65 store credit. Not bad I say. So I  walk around the store for a long time. Needless to say I still have the Redskins pullover in the wrong size !!!!!

Wed, 01/06/2016 - 18:40 | 7007005 Fuku Ben
Fuku Ben's picture

Only 6 days in and Q1 is starting to get ugly. This is starting a few weeks ahead of schedule.

Like most mega corporations they are long self-marketing about their philanthropy and very short on Human Resource friendliness. How about cutting the BoD payments & Senior Exec. Team Comp & Bonuses to make up for the net 1600 or so employees you plan on laying off? That way you can keep everyone.

After all it was the poor planning and execution at the top that put these soon to be laid off employees in this position to start. And now the workers at the bottom have to pay for someone else failing to do their jobs?

They were warned 18 months ago what was coming in retail with my last update at the start of Q4 '15 specifically pointing at Q1 '16. More than enough time for any competent team to plan and prevent problems. Just because corporations cater to the WS analysts and listen to their Execs on projections doesn't necessarily mean either of them know anything.

Apparently all the money Macy's wasted on consultants and Executive pay couldn't even match up with free information they could have read on ZeroHedge. And now thousands of people will pay for it.

Wed, 01/06/2016 - 19:24 | 7007596 o r c k
o r c k's picture

Fuku Ben !!  Are you asking for accountability ? Hah Hah !!

Wed, 01/06/2016 - 21:33 | 7008313 rejected
rejected's picture

Agreed with the feral management that probably would have a tough go of it managing a non permitted lemonade stand.... but

If they kept the 1600 employees,,, what are those employees going to do? Tiddley Winks?

Thu, 01/07/2016 - 01:58 | 7009365 Fuku Ben
Fuku Ben's picture

@ o r c k - More along the lines of insistent. They can run their company the way they want. But I've provided enough guidance for companies and seen the results of their failure to listen or take action on what they paid me to provide. A large % of the time it ends very badly for them. One of the worst ones I briefly mentioned last year. The whole company went under after the BoD took the CEO's plan instead of mine. The CEO plan was sheer lunacy. He cost them a fortune including some personal investments in the company. And a lot of people lost their jobs too.

@rejected - High level overviews or analysis I provide free of charge here with the hope that those that would benefit pay close attention. Most recently I warned oil & gas sector employees to start looking for a new job asap. Any detailed strategic or tactical solutions and analysis I provide for a fee.

Wed, 01/06/2016 - 17:20 | 7007006 Jack Oliver
Jack Oliver's picture

Fuck Macey's - We are ALL going to be dressed like Daniel Boone shortly !

Wed, 01/06/2016 - 17:25 | 7007031 AMPALANCE
AMPALANCE's picture

Long Bowie Knives

Wed, 01/06/2016 - 19:26 | 7007603 o r c k
o r c k's picture

warm weather ? Long Shorts.

Wed, 01/06/2016 - 19:59 | 7007776 tenpanhandle
tenpanhandle's picture

short Bowie knives are easier to hide.

Wed, 01/06/2016 - 18:19 | 7007319 directaction
directaction's picture

I'm not so sure about that. The few wild animals left will go fast. 

Wed, 01/06/2016 - 17:38 | 7007103 Jack Oliver
Jack Oliver's picture

Is it hard to gain acceptance into the AMISH community ???

Wed, 01/06/2016 - 19:27 | 7007610 o r c k
o r c k's picture

Amish??  Long Judgment

Wed, 01/06/2016 - 17:45 | 7007142 Feel it Reel it
Feel it Reel it's picture

Looks like Macy's needed Trump more than they figured.....

Wed, 01/06/2016 - 17:46 | 7007151 Tod E. Tosspot
Tod E. Tosspot's picture

Listening to retailers and economists, you'd think it's damn near impossible to engage in commerce outside of San Diego or Cape Town. 

Wed, 01/06/2016 - 17:53 | 7007194 Kprime
Kprime's picture

Roughly 50 percent of affected store associates are expected to be placed in other positions.

 

That would be the new positions opening up in the unemployment line.

Wed, 01/06/2016 - 18:04 | 7007202 Kprime
Kprime's picture

All this warm weather really has them sweating. there is a drought in sales. perhaps they need more fire sales.

Wed, 01/06/2016 - 18:02 | 7007245 Magnum
Magnum's picture

Not really cheerful about this.  It's like boasting that the USPS should fail.  I'd like to think that a nice department store is out there when I want to shop.  But no, in the new America it's Walmart or nothing ? Amazon wrecked small stores already.  

Wed, 01/06/2016 - 19:09 | 7007536 EddieLomax
EddieLomax's picture

I do make a point now of trying to ignore online retailes and walk around what's left of the highstreet looking for things.

It feels like a losing battle, but we are born to lose and live to win, at least where I am there is one department store of quality left and a handful of shops worth looking in.  And plus it gets some exercise in rather than sitting on my butt all day.

Wed, 01/06/2016 - 18:03 | 7007256 Kprime
Kprime's picture

retired 20 year olds don't shop at macy's

Wed, 01/06/2016 - 18:11 | 7007293 yogibear
yogibear's picture

More H1Bs, L1, H2 and middle eastern refugees should help push more Americans to the unemployment line.

Instead of Macy's it's Goodwill and the Salvation Army.

Wed, 01/06/2016 - 18:12 | 7007296 Yancey Ward
Yancey Ward's picture

Well, there were only 30 days in November and 31 days in December, so that really hurt sales at retailers.

Wed, 01/06/2016 - 18:19 | 7007321 buzzsaw99
buzzsaw99's picture

their stuff is horrid

Wed, 01/06/2016 - 18:21 | 7007331 bnbdnb
bnbdnb's picture

I blame their love of the Donald /s

Wed, 01/06/2016 - 18:26 | 7007356 Magnum
Magnum's picture

Williams-Sonoma is rotten in my opinion, wish that place would close up rather than Macy's.  

Wed, 01/06/2016 - 18:37 | 7007397 fowlerja
fowlerja's picture

I am so proud of this Macy management team... their bonus and golden parachutes are tied to Macy stock price and strong and appropriate action was called for... they did not hesitate or diminish their resolution to put the train back on the track...true to their name Macy (Must Actually Cut You)..they can now go home on a mission well done...

Wed, 01/06/2016 - 18:38 | 7007410 Allen_H
Allen_H's picture

Macy's sounds like a cheap Euro store, like an upscale ASDA.

Wed, 01/06/2016 - 18:45 | 7007440 Black Warrior W...
Black Warrior Waterdog's picture

"voluntary separation opportunity"

Fuck these wordsmiths.

Wed, 01/06/2016 - 21:40 | 7008353 Berspankme
Berspankme's picture

"affected associates" is nice too

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