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Macy's sales slide stokes fears for US department stores Sliding sales stoke fears for US department stores
(about 7 hours later)
Shares in Macy's have plunged after the US department store owner said quarterly sales slid 7.5%. Weaker-than-expected sales at several US department store chains reignited concerns about the US retail sector and prompted investors to offload shares.
Although some of the decline was due to stores being closed, like-for-like sales fell a worse than expected 4.6%. Macy's said like-for-like sales fell 4.6% in the first quarter compared with the same period last year.
Chief executive Jeff Gennette said the company, which also owns Bloomingdales, did not have its "head in the sand". The decline sent shares in Macy's, which also owns Bloomingdales, down 17% on Thursday.
However, Macy's also expected sales this year to fall by up to 4%, causing investors to send its shares down 14% in afternoon trading in New York. At Kohl's, like-for-like sales slid 2.7% and were down 0.8% at Nordstrom.
Fears about the health of the US retail sector spread to rival department store chains, with shares in Kohl's falling more than 5% and JC Penney slipping more than 8%. Shares fell close to 8% for both retailers, while Sears sank almost 10%
Mr Gennette said: "These are unusual and challenging times for retail, especially for mall-based stores. We certainly know these changes that we're seeing are ... not cyclical." Hudson's Bay Co, which owns chains including Saks Fifth Avenue, said its same-store sales fell 2.9%.
Macy's has more than 700 stores, while Kohl's - which has more than 1,100 outlets - said quarterly like-for-like sales fell 2.7%. Jeff Gennette, Macy's chief executive, said the company was well aware of the challenges it faced.
US department stores have shed more than 32,000 jobs over the 12 months to April, according to US government estimates. "These are unusual and challenging times for retail, especially for mall-based stores. We certainly know these changes that we're seeing are ... not cyclical," he said.
Macy's has strived to see off the rise of online retailing by adding discount areas to its stores, striking deals to stock exclusive fashion lines, and making it easier to try on shoes. Some analysts said the decline in department store sales point to broader weakness in consumer spending - a key driver of economic growth.
"It's a gut check about the health of the consumer," said Phil Blancato at Ladenburg Thalmann Asset Management. "It's a canary in the coal mine moment."
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It is also testing new ways to lure shoppers to its stores and encourage them to spend more. The US Commerce Department will release retail sales figures on Friday that are expected to further underline online sales growth outstripping those at brick-and-mortar stores.
Chief financial officer Karen Hoguet said putting collection points for online purchases at the front of the store - rather than forcing customers to find their way to a counter at the back - has actually boosted sales. Nordstrom, which has more than 340 stores in the US and Canada, said about a quarter of sales in the three months to March were online.
Profits for the three months to March fell 39% to $71m compared with the same period last year. It has tried to counter the rise of rival online retailers by opening more of its discount Rack stores, investing in the popular online menswear brand Bonobos and other tweaks such as speeding up its website.
Neil Saunders, managing director of GlobalData Retail, said: "Overall, our sense is that Macy's now has a much clearer sense of direction and it has a rudimentary road map to help it get to where it wants to go. However, the distance it needs to travel over the next few years is enormous. We question whether the company is bold, nimble or healthy enough to cover such ground." Macy's is adding discount areas to its stores, striking deals to stock exclusive fashion lines, and making it easier for customers to try on shoes without a sales assistant.
Mr Gennette said Macy's hoped to introduce a new store format next year. Macy's chief financial officer, Karen Hoguet, said putting collection points for online purchases at the front of the store - rather than forcing customers to find their way to a counter at the back - has actually boosted sales.
"How and when will you grow again is what's been on your mind," he told investors on a call Thursday. "We certainly don't have the answers yet, but we're working on them with great urgency." Mr Gennette, who took over in March, said Macy's hoped to introduce a new store format next year, but the company is still forecasting a fall in sales for the full year.
"How and when will you grow again is what's been on your mind," he told analysts. "We certainly don't have the answers yet, but we're working on them with great urgency."
Neil Saunders, managing director of GlobalData Retail, said Macy's now has a "better sense of direction" than it once did, but added: "However, the distance it needs to travel over the next few years is enormous.
"We question whether the company is bold, nimble or healthy enough to cover such ground."
Macy's profits fell 39% to $71m in the quarter compared with the same period last year.