Macy's and Kohl's Slow Sales Slump, but Investors Still Spooked -- Update

Macy's Inc. and Kohl's Corp. reported another quarter of shrinking sales that spooked investors, even though the latest declines weren't as deep as they have been in recent quarters.

Kohl's executives pointed to signs of improved demand and shopper traffic in summer months and Macy's executives said their store restructuring and inventory reduction put them on track to reach their goals for the year.

Still, the results weren't enough for investors who have soured on the sector. Shares of Macy's fell 8% and Kohl's dropped 7% Thursday morning. Smaller department store chain Dillard's Inc., which Thursday surprised analysts by swinging to a loss, tumbled 13%.

Macy's same-store sales -- a metric that tracks sales at established locations that haven't recently opened or closed -- fell 2.8% in the second quarter, better than the 5.2% retreat in the first quarter.

"I'm encouraged by the second quarter and we're on track for the year," Macy's CEO Jeffrey Gennette said on a conference call. "But I also know that we operate in an environment of intense and destructive competition, and that our customer has more shopping options than ever."

Kohl's same-store sales retreated 0.4% in its latest quarter, less than the 2.7% decline the previous quarter.

"The improvement in our sales trend was driven entirely by an improvement in traffic," Kohl's Chief Executive Kevin Mansell said on a conference call. A notable change came in July, when traffic turned positive compared with the same month last year.

Kohl's was able to lure new shoppers with the addition of the Under Armor brand in its stores. That helped its activewear business post a roughly 15% sales increase in the period compared with a year ago.

Mr. Mansell said Kohl's also sold more goods at full price, while less inventory resulted in fewer promotions to clear unsold goods.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

August 10, 2017 11:15 ET (15:15 GMT)