UPDATE: Macy's Posts 3Q Profit As Sales Rise Nearly 7%
November 10 2010 - 10:46AM
Dow Jones News
Macy's Inc.'s (M) reported strong third-quarter results,
reflecting the continuation of a turnaround strategy that
emphasizes local tastes and is allowing the retailer to outpace
competition.
Macy's posted a profit for the period ended Oct. 30, coming back
from a loss the same time a year ago, as sales rose.
"Throughout 2010, we have gained confidence and momentum as
customers have responded favorably to our execution of key
strategies developed and activated over the past few years," CEO
Terry Lundgren said.
But the results may have come at some cost. Gross margin, which
gauges how much profit is derived from sales, fell in the third
quarter, suggesting that already highly promotional Macy's may be
becoming even more so.
Macy's game plan of late has been to more closely tailor
merchandise to local tastes and needs, with efforts ranging from
having more warm weather gear in the south for longer in the season
to stocking Kentucky Derby merchandise in the Louisville, Ky., area
as the big race draws near. The company has continued to benefit
from prior consolidation of its divisions and introduction of new
brands, including the recent launch of the Material Girl Line by
Madonna and her daughter.
The approach appears to be paying off, with Macy's outdistancing
major competitors Kohl's Corp. (KSS) and J.C. Penney Co. (JCP) in
monthly comparable-store sales. Kohl's and J.C. Penney report their
third quarter results on Thursday and Friday, respectively.
Macy's is also enjoying the resurgence of upper-end spending,
with its Bloomingdale's chain seeing strength in the latest period.
The retailer also saw a surge in online sales.
The third quarter showing, taken in its entirety, makes Macy's
"well positioned to take market share this holiday season," said
Citigroup analyst Deborah Weinswig.
Macy's in the third quarter reported a profit of $10 million, or
2 cents a share, compared with a prior-year loss of $35 million, or
8 cents a share. Excluding debt-repurchase and other impacts,
earnings were 8 cents compared with a loss of 3 cents.
Analysts polled by Thomson Reuters most recently forecast a
5-cent profit.
The retailer for the full-year expects earnings of $1.94 to
$1.99 a share, based on second half guidance it raised last week
and what Macy's reported in the first two quarters.
Gross margin edged down to 40% from 40.5%, while overhead costs
were flat.
Macy's last week reported total sales increased 6.6% to $5.62
billion as same-store sales grew 3.9%. A year earlier total sales
fell 3.9% and same-store sales fell 3.6%.
Sales grew 24% at its online business, which includes macys.com
and bloomingdales.com.
Shares are off 0.7% to $25.09.
(Tess Stynes contributed to this article.)
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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