Macy's Inc. posted a net loss of $44 million, or 10 cents a share, in its third quarter ended Nov. 1, because of deteriorating sales in the period's last six weeks. A year earlier, Macy's earned $33 million, or eight cents a share.The holiday season "will be a nail biter," Macy's Chief Financial Officer Karen Hoguet said in a conference call Wednesday.
To boost sales in the crucial fiscal fourth quarter, Macy's shifted much of its third-quarter marketing budget into the period, she said, but declined to reveal how much.
Macy's, which operates more than 800 department stores in 45 states, maintained its full-year guidance, which it had revised downward last month.
However, it warned that if sales declines continue at their current rate, earnings will likely skew toward the lower end of the range of $1.30 to $1.50 per share.
Macy's had previously estimated that earnings would be in the $1.70 to $1.85 range.
Shares fell 11% to $8.37 in 4 p.m. trading on the New York Stock Exchange. Analysts had expected a larger loss of 19 cents a share, according to Thomson Reuters.
To conserve cash, Macy's said it will slash its 2009 capital spending budget to $550 million to $600 million, down from $1 billion. (This year's budget is $950 million.)
Like other retailers facing a challenging sales environment, Macy's is shelving many store openings and remodeling projects until the economy improves.
Third-quarter sales fell to $5.5 billion from $5.9 billion in the same period last year. Gross margin edged higher by a fraction to 39.5%, as the company cut back inventory to control markdowns.
The slowdown that began in mid-September "was experienced broadly across categories of business and geographies," with the most significant declines hitting furniture, mattresses and Macy's upscale Bloomingdale's chain, Ms. Hoguet said, noting that Bloomingdale's is nevertheless outperforming its competitors.
Macy's also began borrowing from its $2 billion revolving credit facility for the first time this year, drawing down $120 million on Oct. 31 and another $30 million so far this month, from sales of kids shoes and womens clothing.
Because November and December are peak borrowing months for retailers, as they stock up on holiday inventory, Macy's might borrow more. But Ms. Hoguet said the debt will be repaid in early December.
