Cincinnati—Buoyed by “strong sales” at its Bloomingdale’s stores and continued increases in online sales, Macy’s Inc. reported today that its third quarter profit easily beat expectations. As a result, the department store retailer raised its full year earnings forecast.
For the quarter ended Oct. 29, Macy’s Inc. posted a net profit of $139 million, or 32 cents a share, from $10 million, or 2 cents, a year earlier when earnings included a 6 cents a share in expenses to buy back debt.
Last week, Macy’s had reported that its third quarter sales Macy’s rose 4.1% to $5.85 billion. Comparable store sales increased 4%, including a 1.5 percentage point contribution from online sales, which increased some 40%.
Macy’s net income easily beat analysts’ average estimate for 16 cents a share, but narrowly missed their sales expectations for $5.87 billion in the quarter.
Gross Margin Squeezed
“A number of factors contributed to this excellent third quarter performance,” said Terry Lundgren, chairman, president/ceo. “We continue to move forward in the execution of those strategies that have created a culture of growth at Macy’s–including My Macy’s localization of our assortments and shopping experience; omnichannel integration across stores, online and mobile; and MAGIC Selling and associate coaching programs to strengthen customer engagement. Bloomingdale’s also enjoyed a strong quarter, both in stores and online, as customers have continued to respond to bridge and designer merchandise.”
A strong credit card performance also helped, too, Lundgren added.
While retail analysts pointed out that Macy’s Inc. has gained market share from its competitors and its My Macy’s localization efforts have largely been successful, Macy’s is feeling the squeeze from higher cotton prices and shipping costs like most other retailers.
For instance, gross margin narrowed to 39.5% from 40% a year ago due to costs such as the free shipping it offers on its growing online business, said analysts, whose average estimate was for a 39.7% gross margin.
Looking ahead to its full year, Macy’s Inc. raised it earnings forecast to $2.70 to $2.75 a share, up from a previous forecast of $2.60 to $2.65 a share. However, for the current quarter, which will include its holiday sales, the company projected earnings of $1.52 to $1.57 a share below analysts’ average estimate for $1.66.
Lundgren, however, said the company is in a strong position for holiday.
“Our stores look great,” Lundgren added. “Our online sites, as well as our mobile-enhanced websites and apps, provide a robust and convenient complement to the active lifestyles of shoppers. The quality and creativity of our marketing support for holiday is the strongest ever. You can feel the momentum and confidence that has been building at Macy’s since our organizational changes in 2009, and especially over the past nine months. We believe this will help us to continue to capture market share in the fourth quarter and lay the foundation for continued innovation in our business in 2012.”
New Macy’s Store Planned in the Bronx
In other news, Macy’s announced it will be opening two new Macy’s stores in New York and California.
The 850-unit Macy’s will open in a 160,000 square-foot store in the Mall at Bay Plaza in the Bronx in Spring 2014. Macy’s operates seven stores in New York City including its Herald Square flagship, two in Brooklyn, three in Queens and one in Parkchester in the Bronx.
The new Macy’s will “deepen our presence in the diverse and densely populated New York marketplace,” said Ron Klein, chief stores officer at Macy’s
Another two-level, 200,000-square-foot Macy’s that will replace the existing Macy’s store in Westfield South Shore in Bay Shore on Long Island, slated for a Fall 2013 opening..
Macy’s also plans a one-level, 103,000-square-foot store in the Mall of Victor Valley in Victorville, California, which will open in mid-2013.