UPDATE:Macy's 4Q Profit Up 50% On Lower Charges, Better Sales

Macy's Inc.'s (M) fiscal fourth-quarter profit grew 50%, topping expectations, and the retailer predicted 2011 will see continued momentum.

Macy's credited its showing to keeping merchandise relevant by tailoring it to local tastes. Customers are responding to Macy's growing stable of private label and exclusive brands, multi-channel selling efforts and programs that train salespeople to be more engaged with customers, Chief Financial Officer Karen Hoguet said during a conference call with analysts.

The initiatives allowed 4.3% growth in comparable-store sales during the quarter, "on the high end of aggressive guidance we set for ourselves," Hoguet said. The department store's high-end Bloomingdale's chain, although its results are not broken out, also had a quarter that exceeded internal expectations, she said. "All in all, we are entering the year with building momentum which gives us confidence that we should have another strong year."

Macy's does, however, face the same heightened cotton and labor costs as other retailers and some price increases can be expected this year, Hoguet said. Measures like creating a "pricing team" dedicated to the issue are hoped to help pare costs, she said. The company also plans to temper prices increases by avoiding too much extra inventory. One way Macy's sees this occurring is through its "search and send" program where merchandise that may not be in stores can be shipped to customers from another store or a distribution center.

Casting the company's momentum against higher raw material costs, Hoguet predicted a 3% rise in same-store sales for the current year and a flattish gross margin.

Macy's strategies are delivering "continued top-line momentum and strong cash flow generation," said Michelle Clark, retail analyst at Morgan Stanley. Macy's is the first of the big three mid-priced department stores to report fourth quarter results this week. Kohl's Corp. (KSS) reports Thursday and J.C. Penney Co. (JCP) on Friday.

Macy's forecast current-year per-share earnings of $2.25 to $2.30. Analysts polled by Thomson Reuters most recently predicted a $2.27 profit.

The department-store operator has posted improved results amid rising sales of late. It has benefited from prior consolidation of its divisions and the aggressive introduction of new brands.

For the period ended Jan. 29, Macy's posted a profit of $667 million, or $1.55 a share, up from $445 million, or $1.05 a share, a year earlier. Excluding items such as asset-impairment charges and costs related to store closings, per-share earnings were $1.59, up from $1.35. The company expected earnings of $1.44 to $1.49 on same-store sales growth of 3.5% to 4.5% after raising its view in December.

Sales rose 5.4% to $8.27 billion and were up 4.3% on a same-store basis. Analysts polled by Thomson Reuters had predicted sales of $8.29 billion.

Gross margin fell to 41.3% from 41.7%. Online sales rose 29%.

Shares were off 1.8% to $23.32.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

-Matt Jarzemsky and Nathan Becker contributed to this article

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