Return of shoppers boosts Macy’s profits

Return of shoppers boosts Macy’s profits
By Jonathan Birchall, US Retail Correspondent
Copyright The Financial Times Limited 2010
Published: May 12 2010 14:42 | Last updated: May 12 2010 14:42
http://www.ft.com/cms/s/0/3cc6f522-5dbf-11df-b4fc-00144feab49a.html


Macy’s, the US department store chain, reported first-quarter results that it said exceeded its expectations, supported by recovering spending by its mainly middle class shoppers.

Terry Lundgren, chief executive, said the company’s first-quarter earnings of $23m, or 5 cents per diluted share, were “well ahead of what we originally expected”, crediting the impact of a store localisation initiative launched two years ago.

A year ago, Macy’s reported an $88m loss as consumers cut back discretionary spending at its more than 800 Macy’s and Bloomingdale’s stores in the aftermath of the financial chaos on Wall Street.

Mr Lundgren said that both Macy’s and Bloomingdale’s had “an excellent quarter and outperformed most of their key competitors”. The company was one of the first of the large US retailers to report on the first quarter, with lower-price rivals Kohl’s and JC Penney following later this week.

“While the direction of the overall economy remains unclear, we believe we are well positioned to continue to gain market share,” he added.

Sales in the quarter totalled $5.57bn, an increase of 7.2 per cent against the same quarter last year. Same-store sales rose 5.5 per cent from last year.

Its overall sales still remain below the $5.75bn reported in the first quarter of 2008.

Karen Hoguet, chief financial officer, said the retailer remained cautious about the strength of recovering US demand. “While the economy has been stronger than we anticpated, it is unclear how strong it really is,” she said in a call with analysts.

Online sales rose 34 per cent against a year ago, but the retailer did not give a number for total online sales.

Macy’s operating profits increased to $203m or 3.6 per cent of sales in the quarter, compared with adjusted operating income a year ago of $24m, excluding store closure costs. Along with other retailers it has reduced inventories sharply over the past year and lessened the need for clearance price cuts that hit its results a year ago.

Macy’s is also planning to open a new discount store concept, called Bloomingdale’s Outlet, with four stores planned for the autumn. Its more upmarket rival Neiman Marcus, which already has 28 Last Call clearance stores, is also testing a new discount concept, aimed at appealing to more value-focused aspirational luxury shoppers.

Bloomingdale’s also opened its first international store in Dubai in February.

Macy’s increased its full-year sales and earnings guidance at the end of April, saying it expected same-store sales to rise by 3 to 3.5 per cent and earnings per diluted share in the range of $1.75 to $1.80.

Macy’s shares, which have doubled in value over the past year, rose over 2 per cent in morning trading in New York to $24.59.