Macy's Shows Signs of Life After Prolonged Slump
May 16 2018 - 9:48AM
Dow Jones News
By Allison Prang
After closing dozens of unprofitable stores, Macy's Inc.
reported higher sales at those locations still open amid the first
signs that the department store giant is pulling out of a prolonged
slump.
The results were buoyed by a strong economy, with low
unemployment and recent tax cuts that should give consumers more
money to spend.
A big driver of the sales increase was a promotional event that
shifted into this year's first quarter, compared with last year,
when it occurred during the second quarter. Stripping out this
event, same-store sales on an owned plus licensed basis would have
risen 1.7%, according to Neil Saunders, managing director of
GlobalData Retail, a research firm.
Shares in Macy's shot up 7.8% before the market opened Wednesday
after the retailer reported same-store sales growth that widely
surpassed analysts' estimates and raised its projections for the
year.
Macy's said same-store sales rose 3.9% compared with the same
quarter the year before. Analysts polled by Consensus Metrix were
expecting same-store sales to increase 0.3%. Including licensed
stores, same-store sales at Macy's rose 4.2%, while analysts
expected an increase of 1%.
Macy's said it now expects to earn between $3.75 and $3.95 a
share on an adjusted basis, a range 20 cents higher than its prior
guidance. The company also raised the prospects of seeing annual
sales growth. The department-store chain now expects annual sales
to be in a range of down 1% to up 0.5% from its prior forecast of
sales falling between 0.5% and 2%.
Chief Executive Jeff Gennette said in prepared remarks that
Macy's "saw continued healthy consumer spending and significant
improvements in international tourism."
Macy's revenue rose 3.6% to $5.54 billion. Analysts polled by
Thomson Reuters were expecting revenue of $5.37 billion. At the
same time, cost of sales at the company rose 2.4% to $3.38
billion.
Profit climbed 78% to $139 million, or 45 cents a share. On an
adjusted basis, the company earned 48 cents a share.
Analysts polled by Thomson Reuters were expecting Macy's to
report a profit of 37 cents a share on an adjusted basis.
Mr. Gennette said at a conference in March that Macy's
Backstage, the company's discount concept, has helped some Macy's
store sales and that the company wants to bring Macy's Backstage to
the West Coast. In the first quarter, Macy's opened about 20 of
these stores. It had planned to open 100 this fiscal year.
The company also said earlier this month it bought a New York
City concept store called STORY which changes up what it is selling
and its design every four to eight weeks. Macy's also said that
STORY's CEO and founder Rachel Shechtman will become a brand
experience officer at Macy's.
Separately, Macy's said it has ended its joint venture with Fung
Retailing Ltd. in China, but would remain on Alibaba's TMall
platform.
Macy's is also in line for a new chief financial officer. In
early April, the company said CFO Karen Hoguet will retire. She
will remain CFO until a new executive is appointed to take over her
role, but she will stay as an adviser until February. Macy's has
hired a search firm to help look for a new CFO.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
May 16, 2018 09:33 ET (13:33 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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