Macy's Net Jumps 50%, Beats Analysts' Estimates on Celebrity Brands Sales

Macy’s Inc., the second-biggest U.S. department-store chain, reported earnings that beat analysts’ estimates after keeping a lid on costs and selling exclusive holiday gifts from celebrity lines including Jessica Simpson’s.

Net income rose 50 percent to $667 million, or $1.55 a share, in the three months ended Jan. 29, Cincinnati-based Macy’s said today in a statement. Excluding an asset impairment charge, profit increased to $1.59 a share. Analysts estimated $1.52, the average of 15 projections compiled by Bloomberg.

The retailer reduced expenses as a percentage of revenue, after reining in personnel costs and shutting stores, according to Joel Levington, managing director of corporate credit for Brookfield Investment Management Inc. Chief Executive Officer Terry Lundgren drew shoppers with temporary gift shops in 400 stores and on Macy’s website during the holidays, with special products from brands also including Martha Stewart.

“Macy’s had a solid quarter on lower expenses than we had expected,” Joel Levington, who is based in New York, said in an e-mail. “The company benefited from year-ago store closings, tight controls on personnel, and growth in sales online, which incur smaller costs than store sales.”

Macy’s fell 29 cents, or 1.2 percent, to $23.46 at 4 p.m. in New York Stock Exchange composite trading, as the Standard & Poor’s 500 Index fell 2.1 percent. Macy’s shares have retreated 7.3 percent this year.

The retailer forecast earnings of $2.25 to $2.30 a share on a 3 percent increase in same-store sales for this year. Analysts estimated 2011 adjusted earnings of $2.27 a share on average.

‘Flattish’ Margin

Macy’s predicts “flattish” gross profit margin in 2011, Chief Financial Officer Karen Hoguet said on a conference call. The margin, the percentage of sales left after the cost of goods sold, widened to 40.7 percent last year from 40.5 percent in 2009.

Selling, general and administrative expenses shrank to 27.2 percent of sales from 28.2 percent a year earlier. The reduction was driven by a bigger-than-expected gain in sales at stores open at least a year, said Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri, who recommends holding the shares.

Sales exceeded Macy’s expectations in every region as well as at the Bloomingdale’s chain. Online revenue jumped 29 percent.

Same-store sales climbed 4.3 percent, Macy’s said Feb. 3. Arnold projected a 3 percent increase. Revenue rose 5.4 percent to $8.27 billion last quarter.

The net income was $445 million, or $1.05, in the year- earlier quarter.

Industrywide, U.S. same-store sales will climb 3 percent to 3.5 percent this year after a 3.5 percent advance in 2010, which was the strongest performance since 2006, the International Council of Shopping Centers projected Feb. 3. The forecast excludes some chains like Wal-Mart Stores Inc.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.