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MACY'S IN DECLINE
The results for the company, in which David Einhorn’s Greenlight Capital has acquired an undisclosed stake, signalled that the efforts Macy’s is making to lure back customers with an off-price chain, a cosmetics chain to rival Sephora and Ulta, and investments in ecommerce are not yet taking hold. These problems are exacerbated by broader macroeconomic issues such as slower tourist traffic in the wake of strong dollar, which is also proving a drag on sales at both its eponymous and Bloomingdale’s outlets.Consumer spending in the world’s largest economy has been steadily increasing but clothing retailers are having to fight harder to win customers, who are increasingly opting to spend their money on experiences over material goods.Terry Lundgren, chairman and chief executive, said consumer spending levels continued to be weak and “was not counting on” shoppers to spend more in the months ahead.
“Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy’s and Bloomingdale’s are key destinations, as well as a slowdown in some centre core categories — further intensifying the challenges associated with growing top-line sales revenue,” he said.The gloomy outlook from the company, which follow Gap’s particularly weak monthly results and a profit warning earlier this week, shook investor confidence in the retail sector. Macy’s shares were down 13.5 per cent at $31.99 by lunchtime in New York.Gap, which suffered a cut in its credit rating to junk status by rating agency Fitch, fell another 3 per cent to $18.72, extending a four-year decline, while Nordstrom fell 6.5 per cent to $45.69 and Kohl’s dropped 5.5 per cent to $38.90.
Gap shares fall after profit warning
[Jeans are displayed for sale at a Gap Inc. store in New York, U.S., on Friday, Sept. 5, 2014. The Gap Inc. plans to roll out order-in-store to 1,000 stores in October to adapt to changing shopping habits and offer customers ease of shopping. This allows shoppers to connect to Wi-Fi in-store and order an item online that may not be in stock. Photographer: Craig Warga/Bloomberg]Clothing retailer’s brands out of fashion with spring shoppers“Gap continues to see material declines in traffic, and while traffic declines are an issue across the mall space, Gap’s outsized declines are an indication that customer loyalty is waning as product continues to disappoint,” said Fitch analyst David Silverman.
Gap, which also owns the Banana Republic and Old Navy brands, has found itself stuck in the middle of two polar opposite trends: demand for low-end fast fashion with its rapid introduction of copycat catwalk trends as well as high-end aspirational items, all while shoppers are eschewing shopping malls and moving online. It has left the company fighting to stem market share losses through consistent discounting.Traditional bricks-and-mortar retailers have all invested in online strategies that integrate their physical stores to varying degrees of success, but they all face intense competition from Amazon, whose shares on Wednesday were trading near an all-time high, up 2 per cent at $717.83, as Macy’s foundered at close to a four-and-a-half-year low
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