New York—Macy’s Inc. reported today that its first quarter profits jumped 38% thanks to sales increases and flat overhead costs.
But the department store company kept its full year forecast as is, disappointing retail analysts and sending its shares down in early trading today.
For the quarter ended April 28, the owner of Macy’s and Bloomingdale’s reported a profit of $181 million, or 43 cents a share, compared with a year-earlier profit of $131 million, or 30 cents a share.
Total sales were up 4.4% to $6.15 billion. Comparable store sales were up 4.4%. Gross margin narrowed to 38.8% from 39.1% a year ago. Overhead costs were approximately flat at $2 billion with selling, general and administrative costs down as a perfect of sales.
The results were above analysts’ average estimate for earnings of 40 cents a share on sales of $6.13 billion.
Online sales, which include macys.com and bloomingdales.com combined, were up 33.7% and had a 1.5 percentage point benefit to the company’s total comparable store sales.
Benefiting from JCPenney’s Overhaul?
“The momentum in our business at Macy’s and Bloomingdale’s continued to build in the first quarter, with sales and earnings that exceeded our expectations going into the year,” Terry Lundgren, chairman/ceo, said.
For the rest of its fiscal year, Macy’s Inc. reaffirmed its forecast for comparable store sales of about 3.5% for the rest of the year. The company also reiterated its guidance for earnings of $3.25 to $3.30 a share—that’s well below what the analysts’ consensus for $3.41.
But Lundgren was optimistic about sales the rest of this year. “In particular, we feel very good about the business opportunities in front of us for the remainder” of this year, Lundgren said. “This spring, Macy’s significant national promotion featuring the fashions, colors and rhythms of Brazil is an example of a new dimension in merchandising and marketing innovation to capture the imaginations of our diverse customers.”
Lundgren added that the company has ”numerous initiatives in place to generate continuous improvement at Macy’s and Bloomingdale’s in the coming quarters and years, including new thinking we recently announced for attracting customers in the Millennial generation.”
On a conference call with analysts, Karen Hoguet, chief financial officer, reportedly was inundated with questions about rival JCPenney and its overhaul including its everyday low price strategy.
“In markets where we are competing against Penney we have seen an uptick in business,” Hoguet said. “Clearly, we are getting a benefit from what’s happening there.”
Hoguet added that “We’ve got strategies to make sure we keep winning” by courting JCPenney’s “disenfranchised” shoppers.
According to Dow Jones’ wire: “The questioning (of Hoguet), while intense, served a dual purpose–analysts were looking for signs of just how poorly JCPenney will do when it reports next week and wanted to know how aggressive Macy’s is being.”