Feb 23, 2010
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Macy's profit beats, but outlook cautious

Feb 23, 2010

CHICAGO (Reuters) - Macy's Inc (M.N) posted better-than-expected profit for its holiday quarter and forecast an improvement in same-store sales this year.

But Chief Executive Officer Terry Lundgren cautioned investors that he saw little meaningful economic improvement this year, with sales gains likely to come at the expense of Macy's rivals rather than a rebound in consumer spending.

Macy's shares dipped 0.2 percent, but fared better than the Standard & Poor's Retail Index .RLX, which fell 0.6 percent.

"It's a good earnings report getting caught up in today's weaker market environment," said Tim Ghriskey, chief investment officer of Solaris Asset Management, which owns Macy's bonds.

Macy's reported net income of $466 million, or $1.10 a share, for the fourth quarter ended on January 30, compared with a year-earlier loss of $4.77 billion, or $11.33 a share.

Excluding one-time items, it earned $1.40 a share, 3 cents more than what analysts polled by Thomson Reuters I/B/E/S had expected. However, some analysts said even that may not have been enough.

"After what we've seen, where companies were blowing through consensus numbers and offering guidance that was dimes not pennies above (expectations), it has the implication that there's not as much potential for these big earnings surprises to the upside," said Edward Jones analyst Matt Arnold, who has a "hold" rating on Macy's shares.

Sales fell 1.1 percent to $7.85 billion, but that was above the $7.84 billion analysts had expected.

The company attributed the profit to cost cuts, the success of its My Macy's program where it stocks merchandise based on local tastes, a nearly 27 percent increase in online sales and a significant rebound at Bloomingdale's stores.

"The fourth quarter represented a clear-cut improvement in sales trends from earlier in the year," Lundgren said in a statement. "We believe this momentum will continue in 2010. While we still see little meaningful near-term improvement in macroeconomic conditions, we do believe there is opportunity to gain market share."

Sales at stores open at least a year fell 0.8 percent, but that was better than the Cincinnati-based company's forecast decline of 1 percent to 2 percent.

After comparable sales fell throughout most of the year, they turned a corner during the quarter, rising in December and then picking up speed in January with a 3.4 percent increase.

For the current fiscal year, Macy's said it expected same-store sales to rise 1 percent to 2 percent. It forecast earnings of $1.55 to $1.60 a share, while analysts are expecting $1.57.

The company expects full-year capital spending of about $550 million.

Shares of Macy's fell 4 cents to $18.43.

(Reporting by Ben Klayman, additional reporting by Phil Wahba in New York; editing by John Wallace)

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