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Macy’s Boosts Outlook After Catering to Local Tastes

Pedestrians walk past Macy's department store
Pedestrians walk past Macy's department store at Herald Square in New York, on April 6, 2010. Photographer: Jin Lee/Bloomberg

April 27 (Bloomberg) -- Macy’s Inc., the second-largest U.S. department-store chain, boosted its annual profit and sales forecasts, helped by a strategy to better tailor merchandise to local tastes.

Macy’s will earn $1.75 to $1.80 a share this year, Chief Financial Officer Karen Hoguet said at an analyst meeting today in New York. That compares with a $1.77 average of 17 estimates compiled by Bloomberg and a previous maximum forecast of $1.60. Sales at stores open at least a year will rise as much as 3.5 percent, Hoguet said. The Cincinnati-based retailer earlier predicted a gain of 2 percent at most.

Macy’s plan to divide the company last year into 69 districts of about 10 stores each to satisfy local tastes is bearing fruit, Chief Executive Officer Terry Lundgren told analysts. Centralizing its merchandise-buying organization in New York also has helped business, he said. The macroeconomic outlook remains uncertain, the company said in a separate statement today.

“We still are in the early stages of implementation of our new strategies,” said Lundgren, 58. “We are optimistic about the company’s ongoing ability to grow sales and earnings and capture market share.”

Macy’s intends to use its cash to pay down debt and regain an investment-grade rating, Hoguet said. The company has a Ba2 rating from Moody’s Investors Service and a BB from Standard & Poor’s, both two levels below investment grade.

The retailer has more deals in the works to sell “powerful brands” exclusively, Lundgren said.

Macy’s fell 94 cents, or 3.8 percent, to $23.91 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have climbed 43 percent this year.

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

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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