• by Sarah Mahoney  @mahoney_sarah, August 12, 2015

Plagued by weaker international tourism and softer consumer spending, Macy’s second-quarter sales and profits slipped, missing analyst expectations. And while the company is “cautiously optimistic” that results will improve in the second half, it lowered its forecast for the year. The retailer also announced a joint e-commerce venture with the Hong Kong-based Fung Retailing Ltd., expected to begin later this year. 

Admitting the results were a disappointment, the company says net income fell to $217 million, compared with $292 million a year ago. Sales for the Cincinnati-based chain slipped 2.6% to $6.1 billion, compared to $6.3 billion in the same period last year. Comparable sales fell 2.1%. West Coast stores performed best, while those in major tourist centers were weakest. 

Sales of handbags and fragrances were strong, says Karen Hogue, its CFO, in a conference call, while some key center-store categories, including fashion jewelry and watches, were weaker.

The company, which had previously announced the launch of Backstage, a pilot for an off-price concept, confirmed that it expects the six test stores, all in the New York area, to be up and running for the holidays. And it says it is planning to open another 10 freestanding Bluemercury specialty beauty and spa locations before the end of the year, taking that store count to 76.

And while she says it is “far too early to claim victory in back-to-school sales,” the BTS season seems to be going well so far, with denim emerging as a likely bright spot.

Despite the company’s tentative optimism, experts are less certain of a short-term pick-up. “We see added challenges ahead, especially in relation to second half  guidance for positive same-store sales,” writes Paul Trussell, an analyst who follows Macy’s for Deutsche Bank, who reiterated his “sell” recommendation for Macy’s. “In our view, the combination of consumers shopping elsewhere (other industries such as restaurants, as well as other retail players such as off-price), an intense promotional environment especially within the luxury sector,” in combination with other costs, including investments in Backstage and Bluemercury, “will likely produce further operating income declines in the periods ahead.”

The Chinese partnership, called Macy’s China Limited, is scheduled to launch later this year, through an e-commerce presence on Alibaba. The company has been selling online in China since 2011, and the new partnership is expected to improve speed and pricing options for the booming Chinese e-commerce market. Additionally, Hogue says the company expects that making Macy’s more accessible in China will help sales in the U.S. as well, when Chinese people travel here. She says that no physical stores are planned yet, but did not rule out the possibility of future expansion there.