New York—Despite a polar vortex, snows storms that closed 244 stores and a highly promotional holiday season, Macy’s Inc. today reported its fourth quarter profit rose 11% beating forecasts even as sales edged down.
For the quarter ended Feb. 1, the departments store company posted earnings of $811 million, or $2.16 a share, compared with earnings of $730 million, or $1.83 a year, a year ago. Excluding one-time expenses, adjusted earnings were $2.31 beating analysts’ average estimate for $2.17.
Net revenue fell 1.6% to $9.2 billion just missing analysts estimate for $9.27 billion in sales. Comparable store sales were up 1.4% missing a 2.5% rise analysts’ expected.
Valentine’s Sales ‘Sluggish’
Macy’s CEO/Chairman Terry Lundgren blamed bitter winter weather in January that hurt sales despite a rather strong holiday. “Business remained sluggish until Valentine’s Day,” he said.
A bright spot, however was the company’s gross margin that remained at 40.6% of sales despite the highly promotional holiday season when many rivals saw their gross margins burned by increased promotions.
Lundgren noted that Macy’s Inc.’s November/December comp sales rose 3.6%.
“While we had expected a sales decline in January because of the calendar shift, the month was down further than we had expected and we are very disappointed with sales performance in January,” Lundgren explained. “In part, poor January sales were due to the unusually harsh winter weather across much of the country. At one time or another during January, 244 Macy’s and Bloomingdale’s stores were closed because of weather.”
For its 2013, Macy’s Inc. reported sales of $29.93 billion vs. $29.69 billion reported for full-year 2012. Full-year comparable sales were up 1.9%, and full-year net income was $1.49 billion, an increase compared to the $1.34 billion reported in 2012.
“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping. But based on our experience in January and early February, we are watching business trends closely,” Lundgren said.
Macy’s Inc. plans to spend about $1 billion this year on capital projects including store remodels and improving e-commerce capabilities. The company had already announced eliminating about 2,500 jobs and closing some stores which is expected to bring some $135 million in cost savings.
Stifel Nicolaus analyst Richard Jaffe said Macy’s was “in a better position than most to gain market share.”
Looking ahead, Macy’s Inc. reiterated its previous forecast: earnings per share of $4.40 to $4.50 with comparable store sales increasing 2.5% to 3%.
Accessories named Macy’s “Retailer of the Year” in the March 2014 issue which includes a profile of the department store and its accessories business.