Macy’s returns to 4th-quarter profit partly on reduced expenses; sales decline slightly

By AP
Tuesday, February 23, 2010

Macy’s returns to 4Q profit, helped by lower costs

CINCINNATI — Macy’s Inc. returned to a fourth-quarter profit Tuesday on lower expenses. While sales dipped, the department store operator believes it will be able to boost earnings and revenue for the rest of the year after a solid holiday season.

During the holidays, Macy’s kept a tight lid on inventory to avoid having to clear items out at steep discounts, which cost it in 2008. The nation’s second-largest department store chain said these efforts helped it stay ahead of most of its major rivals during the holiday season as a key sales figure improved in December and January.

“We believe this momentum will continue in 2010 as we challenge our very talented organization, which is energized and focused, to further improve sales and earnings,” Chairman, President and CEO Terry Lundgren said in a statement.

The retailer, which also runs Bloomingdale’s stores, provided a 2010 profit in range of analysts’ views.

Macy’s earned $466 million, or $1.10 per share, for the period ended Jan. 30. Adjusted profit was $1.40 per share, which beat Wall Street’s $1.32-per-share estimate. Analysts’ estimates normally take out one-time items.

The performance also surpassed Macy’s outlook for adjusted earnings of $1.35 to $1.37 per share. The retailer had increased its profit outlook earlier this month after reporting sales at stores open at least a year rose 3.4 percent in January.

The current quarter included charges totaling 30 cents per share for costs related to unit consolidations, localization efforts, five store closings and charges to write down the value of some properties. The prior-year period’s charges totaled $12.39 per share.

Shares fell 20 cents to $18.27 in premarket trading.

Fourth-quarter sales slipped 1 percent to $7.85 billion, but met the expectations of analysts polled by Thomson Reuters.

Lundgren said sales trends have started to get better, with efforts to localize its merchandise to regional markets, strong online sales and Bloomingdale’s recovery all contributing.

Macy’s localization drive, dubbed My Macy’s, seeks to concentrate the chain’s top talent in local markets and stay on top of trends by grouping Macy’s stores into districts of 10 to 12 stores each.

Online sales — which includes macys.com and bloomingdales.com results — surged 26.6 percent in the quarter.

While Macy’s doesn’t expect economic conditions to improve significantly near-term, Lundgren said the retailer is confident it can gain market share by boosting sales at stores open at least a year.

This figure is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

Sales at stores open at least a year edged down 0.8 percent in the fourth quarter, but slightly bested Macy’s forecast for a decline of 1 percent to 2 percent.

Macy’s moved to a full-year profit of $350 million, or 83 cents per share. That compares with a loss of $4.8 billion, or $11.40 per share, in the prior year.

Adjusted earnings were $1.41 per share.

Annual sales fell 6 percent to $23.49 billion from $24.89 billion.

For fiscal 2010, Macy’s anticipates a profit between $1.55 to $1.60 per share. That is in range of analysts’ forecasts for full-year earnings of $1.57 per share.

The retailer predicts sales at stores open at least a year will climb 1 percent to 2 percent in 2010.

Macy’s, which has corporate offices in Cincinnati and New York, runs about 850 department stores in 45 states.

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