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Macy's executives said in an earnings conference call Wednesday that a steeper than planned slowdown in sales in the third quarter, especially in October, has the company reducing buying plans for spring and fall 2009, in addition to cutting capital spending.
The company had expected an improvement in results in spring as it anniversaries soft results from the previous spring, but is now less confident of a rebound then.
"We are ... reducing our plans relating to merchandise receipts and our expense budgets for both spring and for fall of 2009, given this uncertainty. If trends improve, we will be able to add back some of these capital projects and order more merchandise, but at this point we don't see any upside in being optimistic," CFO Karen Hoguet said during the call, according to the transcript by Seeking Alpha.
Macy's, the largest department store customer for many action sports industry customers, said same-store sales fell 6 percent in the third quarter, while total sales fell 7 percent to $5.5 billion. Macy's recorded a net loss of $44 million vs. net income of $33 million during the same period last year.
The company's average unit retail decreased in October for "the first time I can remember," Hoguet said. Macy's full-priced business also slipped in October, a change from earlier in the year when the clearance business was weak.
In another interesting twist, Macy's moderately priced private label brands, such a Style & Co, had resurgence during the quarter as shoppers looked for value and practical purchases.
Shoppers' focus on value has Macy's reviewing its marketing plans and reviewing its spring merchandise plans to make sure the department store is focused on the right strategy.
The weakness that accelerated in the third quarter extended across all categories and geographies, the company said. Southern California and Florida were the toughest markets.
The weakest categories were furniture and mattresses.
On a bright note, Bloomingdale's is outperforming its upscale competitors.
With regard to store closures, Hoguet said the company is conducting its usual review of underperforming stores. She does expect stores to close, but said the number will not be extraordinary or any different than the number of stores that typically close in a year.
The company expects same-store sales to be down 1 to 6 percent in the fourth quarter.