By Nandita Bose and Sruthi Ramakrishnan
(Reuters) - Department store operator Macy's Inc (N:M) cut its full-year sales and profit forecasts on Wednesday and said it would not follow an activist investor's suggestion to form a real estate investment trust, sending its shares down nearly 14 percent.
The company also reported lower fiscal third-quarter earnings and revenue, in part because of tepid consumer demand and a strong dollar that discouraged tourists from spending at its stores.
Starboard Value had urged Macy's in July to consider spinning off its real estate assets, valuing them at about $21 billion. The investor had said a REIT would trade at a higher multiple than the stores.
"We and our board concluded there was not enough value to be created from the establishment of a REIT at this time," Chief Executive Officer Terry Lundgren said on a conference call.
Instead, he said, Macy's would focus on forming potential partnerships or joint ventures for its four major flagship properties in New York's Herald Square, Union Square in San Francisco, State Street in Chicago, and downtown Minneapolis. The retailer will also look for ways to profit from or redevelop its real estate.
Lundgren said he was not happy with Macy's performance in the quarter ended on Oct. 31, which also suffered from warm weather in September and October that hurt sales of coats, jackets and other winter clothes.
"We are disappointed that the pace of sales did not improve in the third quarter, as we had expected," he said.
Sales at stores open at least a year fell 3.6 percent in their third straight quarterly decline. Analysts on average had expected 0.2 percent growth, according to research firm Consensus Metrix.
Macy's said it expected same-store sales to fall by 1.8 percent to 2.2 percent for the year ending in January.
The company cut its full-year profit forecast to $4.20 to $4.30 per share, excluding special items, from a prior range of $4.70 to $4.80.
Net income attributable to shareholders fell 45.6 percent to $118 million, or 36 cents per share, partly due to a charge for some planned store closings.
Net sales fell 5.2 percent to $5.87 billion, the third straight quarter of declines and below the analysts' average estimate of $6.09 billion, according to Thomson Reuters I/B/E/S.
Excluding items, Macy's earned 56 cents per share, exceeding analysts' expectations of 54 cents.
Also on Wednesday, Ray-Ban maker Luxottica Group (MI:LUX) announced plans to open licensed LensCrafters concessions in up to 500 Macy's stores over the next three years.