New York—Macy’s Inc. rebounded today after posting a “disappointing” second quarter earnings in August. Today, the department store company boasted a 31% increase in its third quarter profit, beating expectations.
“Our business improved during the quarter, with particular strength in October, so we are entering the fourth quarter with confidence,” said Terry Lundgren, chairman/ceo.
The report was overwhelmingly given a positive greeting on Wall Street, too. Shares in the company rose 10% in trading earlier. The news, in fact, helped buoy shares in other department stores and at Macy’s vendors.
For the quarter ended Nov. 2, Macy’s posted net income of $177 million, or 47 cents a share, compared with net income of $145 million, or 36 cents per share, a year ago. That easily beat analysts’ expectations for 38 cents a share.
Positive News Heading into Q4
Net sales were up 3.3% to $6.276 billion, also beating analysts’ estimate for $6.19 billion in sales. Comparable store sales, which include macys.com and bloomingdales.com, rose 3.5%. Combined with sales from departments licensed to third parties, comp sales rose 4.6%.
While much of the department stores’ third quarter success was due to more aggressive promotions and longer sales event, its gross margin was slightly hurt, narrowing to 39.2% from 39.6% a year ago.
Operating income came in at $360 million, or 5.7% of sales, compared to operating income of $325 million or 5.4% of sales this time last year.
Noting that this marks the 15th consecutive quarter of per share earnings increases, Lundgren said, “Our improved sales performance resulted from continued success in the execution of our key strategies—My Macy’s localization, Omnichannel integration and Magic Selling customer engagement. In addition, business in the third quarter benefitted from intensified marketing strategies to emphasize the outstanding value in our merchandise deliveries.”
Lundgren said that both Macy’s and Bloomingdale’s performed well during the quarter with sales improving in every region of the country compared with the spring season.
He also noted that the second year of remodeling Macy’s Herald Square store was completed with the entire first and second floors now fully re-created into “the world’s most exciting presentation for important categories such as cosmetics, fragrances, women’s shoes, fine jewelry, watches and men’s apparel.”
Macy’s Inc. also reiterated its previous forecast for fourth quarter: an increase of 2.5% to 4% in comparable store sales. For full year, comp sales are expected to hit between 2% to 2.9% with per share earnings in the range of $3.80 to $3.90 a share.
“Our success in the fourth quarter will be driven by a wide selection of exclusive products from the most-wanted brands and designers,” Lundgren added. “We will bring them to our customers, whether they shop in our stores, online, via mobile—or all three. The values we offer will be appealing. We will be better able to satisfy customers’ needs with an energized organization supported by the hiring of 83,000 seasonal associates. Our in-store and online executions will complement each other, and our marketing will clearly communicate the Magic of Macy’s and the exceptional holiday fashion at Bloomingdale’s.”
As one of the first of a long list of major retailers to report its third quarter results, Macy’s may be viewed as a harbinger of things to come.
“This was a big turnaround,” Brian Yarbrough, an analyst with Edward Jones & Co., said. “Macy’s is the first of many retailers to report, but it does sound like there is some hope there for the holiday season.”