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Macy's lowers FY'19 EPS outlook after Q2 miss; shares drop 14.4%

Macy's Inc. shares fell 14.4% in premarket trading Aug. 14 after lowering its earnings guidance for fiscal 2019 and reporting second-quarter earnings that missed analysts' expectations.

The retailer lowered its full-year adjusted diluted EPS guidance to a range of $2.85 to $3.05 from its previous outlook of $3.05 to $3.25 due to its second-quarter performance that fell below its expectation. However, the company continues to expect net sales to be approximately flat, while comparable sales on an owned and licensed basis are still expected to be flat or up 1% for the full year.

"Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women's sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism," Macy's CEO and Chairman Jeff Gennette said in a statement.

The retailer said the updated outlook does not reflect the newly proposed 10% tariffs on $300 billion of Chinese imports. Following the Trump administration's decision to delay tariffs on certain products until Dec. 15, Macy's said it is "evaluating the details of these tariffs and is actively working with its vendor partners and suppliers in China to help mitigate potential impact."

The retailer reported that adjusted diluted EPS for the quarter ended Aug. 3 fell to 28 cents from 70 cents in the year-earlier quarter, missing the mean consensus estimate for normalized EPS of 45 cents according to data compiled by S&P Global Market Intelligence.

Net sales for the second quarter fell to $5.55 billion from $5.57 billion in the year-ago period, while comparable sales grew 0.3% on an owned and licensed basis. On an adjusted basis, net income fell to $88 million from $219 million in the year-earlier quarter.

For the first half of 2019, net sales fell slightly to $11.05 billion from $11.11 billion in the year-ago period, while comparable sales on an owned and licensed basis grew 0.5% compared to the 2.3% growth posted in the first half of the prior year. Adjusted net income for the first half of fiscal 2019 fell to $225 million from $369 million in the year-ago period, while adjusted diluted EPS fell to 72 cents from $1.19 in the year-ago period.

In premarket trading, Macy's shares were down 14.4% at $16.57.