Macy’s Results Beat Expectations, Lead Retail Sector Higher

Macy’s Inc. has exceeded its expected earnings for the second quarter as consumers opened up their pocketbooks this spring.
Macy’s Results Beat Expectations, Lead Retail Sector Higher
8/12/2009
Updated:
8/12/2009
NEW YORKDepartment store chain Macy’s Inc. has exceeded its expected earnings for the second quarter as consumers opened up their pocketbooks this spring.

Despite reporting a 9.7 percent decrease in sales from last year’s second quarter, the company, which operates more than 840 department stores across 45 states, reported earnings of 20 cents per diluted share, exceeding analyst expectations by 15 to 17 cents.

“We were able to exceed our expectations with strong earnings and cash flow in the second quarter, despite lower sales in an economic environment that continues to be very difficult,” said Terry J. Lundgren, Macy’s, Inc. chairman, president and chief executive officer in a press release.

The figures include online sales from Macys.com and Bloomingdales.com which increased by 9.4 percent in the second quarter of this year. Macy’s Inc. Chief Financial Officer Karen M. Hoguet credited this to more integrated store and Web site strategy for both stores, during the earnings call with analysts on Wednesday.

Currently, Macy’s Inc. is one of the most successful retailers in the country, reporting sales of $24.9 billion in 2008. Many competing retailers will be releasing their earnings this Thursday, August 13. The U.S. government’s July retail report is also due on Thursday.

ComScore, a leading research company measuring the digital world, reported this week that online retail spending in the United States has decreased one percent from the second quarter of last year, totaling $30.2 billion.

“Unfortunately, it appears that the reality of nearly 10 percent unemployment and rising gas prices, coupled with an increased savings rate, continues to hold down consumers’ discretionary spending and it may still take some time to dig our way out of this recession,” said comScore Chairman Gian Fulgoni in its report.

Macy’s expects its sales to fall about 5-6 percent in the remaining part of the year. According to Macy’s press representative Jim Sluzewski, unlike other retailers, the back to school season is not the time Macy’s customers increase their spending. He said that sales come through around the winter holidays.

In Manhattan, Macy’s flagship store in Herald Square is facing tough competition with the recent opening of a competing J.C. Penney store.

Sluzewski said that Macy’s is differentiating itself through a localization initiative called “MyMacy’s,” an initiative designed to identify specific consumer needs on the basis of location by adding merchandizing professionals.

Hoguet said that the sales in the pilot MyMacy’s districts, implemented a year ago, continue to outperform the rest of the stores and that the out performance accelerated in the second quarter. These districts outperformed remaining stores by 2.6 percent in the spring season.

Macy’s stock rose $0.93 (6 percent) in Wednesday trading. The news also led the retail sector higher. Rival J.C. Penney Co. saw its shares increase 22 cents to $33.21, and Dillard’s Inc. shares jumped 31 cents to $11.58.