Aug 12, 2015
Macy's reports lower-than-expected sales, forms China JV
Aug 12, 2015
By Sruthi Ramakrishnan
(Reuters) - Macy's Inc reported lower-than-expected quarterly sales as a strong dollar "significantly" reduced spending by foreign tourists in the United States and the company discounted to clear merchandise delayed due to the West Coast port strikes.
The company also said on Wednesday that it had formed a joint venture with a Hong Kong-based company to explore online retailing in China.
Shares of Macy's, which operates its namesake stores and the upscale Bloomingdale's chain, rose about 1 percent in premarket trading, reversing course.
The retailer said it would start selling its products online in China later this year through Alibaba Group Holdings Ltd's Tmall Global. Macy's will be the first U.S. department store to list on Tmall.
The company will own a 65 percent stake in the joint venture, Macy's China Ltd, with Fung Retailing Ltd.
Macy's said it expected sales of about $50 million from China in 2016.
The company also said it would sell a part of its Fulton Street retail store in Brooklyn to real estate company Tishman Speyer for $170 million. Macy's will get an additional $100 million over three years and continue to own and operate four floors of the nine-storey store.
Macy's, under pressure from activist investor Starboard Value to consider spinning off its real estate portfolio, said it had hired advisers to "intensely study its real estate portfolio to determine where opportunities exist."
The company's same-store sales, including licensed departments, fell 1.5 percent in the second quarter. Analysts on average had expected a 1.3 percent rise, according to research firm Consensus Metrix.
Macy's forecast flat same-store sales for the year ending January 2016 and a fall of about 1 percent in total sales. The company earlier forecast a rise of about 2 percent in same-store sales and an increase of about 1 percent in total sales.
Macy's net income fell 26 percent to $217 million, or 64 cents per share, in the quarter ended Aug. 1.
Net sales declined 2.6 percent to $6.10 billion, the fourth drop in six quarters.
Analysts on average had expected earnings of 76 cents per share and revenue of $6.23 billion, according to Thomson Reuters I/B/E/S.
Macy's shares were trading at $68.20 before the bell. (Editing by Kirti Pandey)
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