Macy’s Profit Tops Estimates as Stock Buyback Boosted

May 15 (Bloomberg) -- Candace Corlett, President of WSL Strategic Retail, discusses both the success of Macy’s and the failure of J.C Penney. She speaks on Bloomberg Television’s “In The Loop.” (Source: Bloomberg)

Macy’s Inc. (M), the second-largest U.S. department-store chain, reported fiscal first-quarter profit that beat analysts’ estimates and increased its share buyback program by $1.5 billion. The shares advanced.

Net income in the period ended May 4 rose 20 percent to $217 million, or 55 cents a share, from $181 million, or 43 cents, a year earlier, Cincinnati-based Macy’s said today in a statement. Analysts projected 53 cents, the average of estimates compiled by Bloomberg.

Chief Executive Officer Terry Lundgren has been tailoring merchandise to match local tastes and extending exclusive goods, from Madonna-inspired shoes to Keds apparel, to draw younger customers. Profit was helped by controlled selling, general and administrative expenses as well as a lower tax rate, Deborah Weinswig, a Citigroup Inc. analyst, wrote in a note today.

Macy’s rose 2.5 percent to $48.57 at the close in New York. The shares gained 24 percent this year, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

The increased buyback means Macy’s had $2.6 billion authorized for share repurchases as of May 4. The company raised its dividend by 25 percent. The quarterly dividend will rise to 25 cents a share, with the first one payable July 1 to shareholders of record as of June 14, Macy’s said.

Photographer: David Paul Morris/Bloomberg

People carry Macy's shopping bags outside a store in San Francisco on May 10, 2013. Close

People carry Macy's shopping bags outside a store in San Francisco on May 10, 2013.

Close
Open
Photographer: David Paul Morris/Bloomberg

People carry Macy's shopping bags outside a store in San Francisco on May 10, 2013.

Expenses shrank to about 32 percent of sales, a 52 basis-point drop. A basis point is 0.01 percentage point. Weinswig, who is based in New York and recommends buying the shares, had estimated a 27 basis point reduction.

Revenue rose 4 percent to $6.39 billion, matching analysts’ estimates. Sales at stores open at least a year climbed 3.8 percent.

Sales gains were crimped by bad weather, Michael Binetti, an analyst with UBS AG, wrote in note today.

“We were heartened” by the share buyback and the dividend increase, wrote Binetti, who is based in New York and rates the shares neutral, the equivalent of hold.

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.