Macy’s Inc. Posts Impressive Profit Despite Difficult Q1

Macy's stores celebrating American Style this summer

Macy’s stores celebrating American Style this summer

New York—Macy’s Inc. proved again to be a market leader today as its first quarter profit increased 20% despite challenges among some of its customers

For the quarter ended May 4, the parent to Macy’s and Bloomingdale’s posted a net profit of $217 million, or 55 cents a share, compared to $181 million, or 43 cents a share, a year ago. Analysts’ average estimate expected 53 cents a share.

Net sales 4% to $6.39 billion in line with analysts’ estimate. Comparable store sales were up 3.8%.

Gross margin was flat with first quarter 2012 at 38.8% as input costs rose 4.1%. Interest expense dropped 13%.

“We are especially pleased with our first quarter sales and earnings performance given the challenges we overcame in this period,” said Terry Lundgren, chairman/president/ceo. “These included sustained, unseasonably cool spring weather in our northern climate zones. In addition, we saw weakness among some of the most budget-conscious consumers, as well as among our higher household income Bloomingdale’s customers.”

Nonetheless, the retailer’s performance again seemed to verify that the three-pronged strategy it has employed: the My Macy’s localized merchandising program, staff training and emphasis on “omnichannel” selling (linking stores with Internet with warehouses) continued to be working.

Taking Share from JCPenney, Kohl’s?

It also has put the company in the position of taking away share, and customers, from rivals.

“I do think these guys (Macy’s) continue to take share from the JCPenneys of this world and the Kohl’s of the world,” Edward Jones analyst Brian Yarbrough told Reuters.

Karen Hoguet, chief financial officer, told analyst on a conference call that “we are seeing some weakness among our more budget-conscious, what we call deal-hunting customers.”

As far as merchandise categories, Hoguet said women’s, teen and young adult apparel were the slowest businesses while handbags and menswear were top performers.

Looking ahead, Macy’s Inc. reaffirmed its prior forecast for full year earnings in the range of $3.90 to $3.95 a share. Analysts’ consensus expects $3.92 a share. Comparable store sales for the year should increase 3.5%.

The company also said its board approved a $1.5 billion increase to its share repurchase program. Including authority leftover at the end of the first quarter, Macy’s Inc. now has about $2.6 billion to buy back its own shares.

Furthermore, the department store company raised its dividend to 25 cents from 20 cents, the third boost in the last two years. The dividend will be paid on July 1 to shareholders of record at the close of business on June 14.

 

 

 

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com