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US retailers Macy's and Kohl's slash 2016 profit forecasts citing weak holiday sales
[CHICAGO] Department store chains Macy's Inc and Kohl's Corp cut their profit forecasts for the year on Wednesday, after holiday season sales for both retailers fell more than expected, pushing shares in the retail sector down in extended trading.
Macy's shares were down 9.7 per cent at US$32.37 and Kohl's shares plunged 14.7 per cent to US$44.25 after hours. Other retailers were also down sharply, with JC Penney Co Inc off 4.6 per cent and Nordstrom Inc down 5.2 per cent.
US department stores have continued to miss out on the spending uptick experienced by many US retailers and have suffered heavily in the face of competition from online rivals including Amazon.com Inc.
The chains have also been hurt by a drop in demand for clothes and accessories like watches and handbags as consumers spent more on big-ticket items such as home renovations and cars.
Macy's said it will close 68 stores this year, part of a plan the company announced last August when it said it will shutter 100 stores. The shutdowns may result in layoffs of about 3,900 employees, the company said on Wednesday.
The closures are the latest in a long list of moves by the retailer to spur growth. It would be the fastest pace at which the company has closed stores, after shutting a net 77 stores over six years.
"While our sales trend is consistent with the lower end of our guidance, we had anticipated sales would be stronger," Macy's Chief Executive Officer Terry Lundgren said in a statement. He said traffic at its stores continued to decline even though its online business performed well.
Macy's cut its adjusted profit forecast for the fiscal year ending Jan 30 to US$2.95-US$3.10 per share from US$3.15-US$3.40 per share that it previously expected after its comparable sales on an owned plus licensed basis fell 2.1 per cent in November and December.
Macy's said its store closures would bring in total cost savings of approximately US$550 million, starting this year. This will enable the retailer to invest US$250 million to expand its digital business, among other initiatives.
Rival Kohl's said sales were volatile throughout the holiday season, even though it witnessed strong sales on Black Friday and the week before Christmas.
The retailer's comparable holiday sales fell 2.1 per cent, forcing it to cut its adjusted profit forecast for the year ending Jan 30 to US$3.60-US$3.65 per share from its previous forecast of US$3.80-US$4.00.