(Bloomberg) -- Macy's Inc., the largest department-store company in the U.S., plunged in late trading after cutting its earnings outlook and vowing to eliminate 6,200 jobs, or about 4 percent of its workforce.
Following a sluggish holiday season, the company now expects profit of $2.95 to $3.10 a share this year, excluding some items. It previously predicted a range as high as $3.40.
The beleaguered retailer is taking more drastic steps to slim down as it copes with sluggish traffic and weak sales in key categories, such as handbags. It previously announced plans to shut 100 underperforming stores, and the chain has been evaluating ways to squeeze more money out of its real estate.
“We had anticipated sales would be stronger,” Chief Executive Officer Terry Lundgren said in the statement. “Ongoing weakness in handbags and watches negatively impacted our results.”
Macy's shares fell as much as 9.2 percent to $32.55 in late trading. That follows a 2.4 percent gain for the stock last year.
Comparable-store sales declined 2.1 percent from a year earlier in November and December, the low end of its projections, the Cincinnati-based company said on Wednesday. It maintained its prediction that sales will decrease 2.5 percent to 3 percent for the full year, which lasts until the end of this month.
Deeper Cuts
The move to cut costs should generate annual savings of $550 million, beginning in 2017, Macy's said. That's higher than a previous goal of $500 announced in 2015. The idea is to pump the savings into its e-commerce business, Chinese operations and other units, such as its Bluemercury makeup division.
“We have been focused and disciplined about making strategic decisions to position us to gain market share and return to growth over time,” Lundgren said. But the trends remain challenging, he said.
Next year's sales are expected to be similar to what Macy's experienced in November and December, Lundgren said.
“We continue to experience declining traffic in our stores where the majority of our business is still transacted,” he said.
To contact the reporters on this story: Nick Turner in New York at nturner7@bloomberg.net, Lindsey Rupp in New York at lrupp2@bloomberg.net. To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kevin Orland
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