Macy’s Inc NYSE: M

An activist Macys shareholder dumped its shares. The firm, Starboard Value, bought its shares in 2016. Soon after, Starboard Value inquired as to why Macys had not sold more of its real estate. No one from the firm commented on the sale.

It has been a hectic week for Macys. Saks Fifth Avenue decided not to buy the troubled retailer.

But it is not the only retailer struggling across the country.

JC Penney will close 130 to 140 stores and two distribution centers in the coming months. The retail chain wants to return to improve profitability. Plus, the company will offer a voluntary early retirement program for several thousand employees. JC Penney posted a fourth quarter profit in contrast to a loss in 2015.

Total sales and one measure of revenue fell a bit. Shares fell almost 10 percent, amid a reserved guidance report. CEO Marvin Ellison conveyed the retail chain’s weaknesses. These include un-strategic marketing and heavy discounts. Ellison plans to pursue a data-driven method this year to price products. JC Penney continues to adapt to changing shopping habits.

But it is also recovering from a failed turnaround plan. Sales and profits fell after the plan started. In turn, JC Penney focused on its home goods and selling major appliances. Profit rose to $1 million for the entire fiscal year. This was the first time the company posted an annual profit since 2010.

“With a slimmed-down store portfolio, (J.C. Penney) will be able to focus on making its remaining stores more of a destination,” said Neil Saunders, managing director of GlobalData Retail. “This is essential, as while progress has been made on categories like home, other departments still require attention.”

JC Penney beat out some of its competitors. For instance, Kohl’s Corp lost sales and profit during the last quarter. Revenue at new stores fell over 2 percent. Nordstrom Inc. reported better profit due to online orders. But stores sales fell nearly 3 percent.

Macy’s earnings dropped about 13 percent due to cost cutting measures and fewer sales. Therefore, JC Penney and other retailers want to become less dependent on clothing. This move shows JC Penney is not the only store struggling in this new era of retail. For example, Sears Holdings’ balance sheet has bled for several years. Competition from the physical stores like Walmart and online retailers like Amazon pressured Sears.

The companies latest earnings reflect its struggle. CEO Edward S. Lampert said the following in the latest earnings report: “It looks as though the company’s “transformation” will lead to miniature version of its former self – a shadow of the retail giant it once was. In an email to Reuters, Neil Saunders, a researcher shared a similar view. “This quarter shows no sign of even the mildest of improvements: on the contrary, the trends have worsened with the weakest comparable performance so far this year.

Retailers, Including Macys Struggle

It is now too late to turn this around. The rot has well and truly set in and it is just not financially feasible to reverse it.”  Debt plagues Sears. Obligations increased by $1.5 billion in less than a year. The most telling part of the report is the revenue decrease. The $800 million year-over-year revenue loss shows the company’s chronic problems. These issues remain multi-faceted. The company may stay on this spiraling path for the near term. It may face difficulty maintaining its current operational level. Plus, the latest financial figures support Saunders.

Source: Cincinnati


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