Macy’s Inc. (NYSE: M) reported second-quarter 2017 results before markets opened Thursday. The department store giant posted adjusted diluted earnings per share (EPS) of $0.48 on revenues of $5.55 billion. In the same period a year ago, Macy’s reported EPS of $0.54 on revenues of $5.87 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.46 and $5.52 billion in revenue.

Comparable store sales for owned plus licensed stores fell 2.5% in the quarter, and they fell 2.8% on the company’s owned stores. Net sales fell 5.4% year over year, due in part to store closures.

Operating income as reported totaled $254 million, representing a margin of 4.6%, compared to operating income of $117 million or 2% of sales in the year-ago quarter. Second-quarter operating income includes $43 million in book gains related to the sale of real estate, up from $21 million in the second quarter of 2016.

Macy’s reaffirmed its full-year same-store sales guidance calling for a decline of 2% to 3% on an owned plus licensed basis, with same-store sales at owned stores down 2.2% to 3.3%. Total sales are expected to be down between 3.2% and 4.3% year over year. Adjusted EPS guidance falls in a range of $2.90 to $3.15, excluding items including a gain on the sale of its San Francisco property.

Consensus estimates call for third-quarter EPS of $0.15 on revenues of $5.32 billion. For the full year, analysts were looking for EPS of $3.29 on sales of $24.67 billion.

Improved margins based on fewer stores is a tactic that can only work for so long. Investors will be disappointed in the company’s EPS guidance and that will cost the stock in today’s trading.

CEO Jeff Gennette said:

We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year. We are working with a mindset of continuous improvement and will adapt our business in order to reach our goal of stabilizing the brick-and-mortar business while investing for accelerated growth in digital and mobile. Key to this strategy is engaging our customers with an improved experience that includes more elevated and exclusive assortments, a better integration of technology both online and in the store, and additional enhancements intended to drive traffic and sales.

Shares traded down about 2% in Thursday’s premarket session, at $23.03 in a 52-week range of $20.85 to $45.41. The 12-month consensus price target on the stock was $26.06 before results were announced. The high price target was $36.00.

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