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Macy’s Tops Profit Estimates on Smaller Job-Cutting Costs

Taxis Drive Past Macy's Inc. Flagship Store in New York
Taxis drive past Macy's Inc. flagship store in New York. Photographer: Peter Foley/Bloomberg

Macy’s Inc., the second-largest U.S. department-store company, topped fourth-quarter profit estimates after recording a smaller-than-projected charge for a cost-cutting program, even as winter weather hampered sales.

Net income rose 11 percent to $811 million, or $2.16 a share, from $730 million, or $1.83, a year earlier, the Cincinnati-based company said today in a statement. Excluding one-time expenses, profit was $2.31 a share, beating the $2.17 average of 20 analysts’ estimates compiled by Bloomberg.

The belt-tightening effort, which involves eliminating about 2,500 jobs and closing some stores, brought a $88 million charge last quarter. Macy’s had originally predicted expenses of as much as $135 million. The company also reiterated its forecasts for 2014, despite sluggish sales in January and February.

“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping,” Chief Executive Officer Terry Lundgren said in the statement.

Macy’s shares advanced 6 percent to $56.25 at the close in New York. The retailer’s stock jumped has jumped 46 percent in the past year.

Revenue fell 1.6 percent to $9.2 billion in the fourth quarter, which ended Feb. 1. Analysts had estimated $9.27 billion on average, according to data compiled by Bloomberg. Sales at stores open at least a year climbed 1.4 percent, compared with the 2.5 percent analysts had predicted.

Cold Weather

Harsh weather hampered sales in January, forcing 244 Macy’s and Bloomingdale’s stores to close at one point or another, Lundgren said. “Business remained sluggish until Valentine’s Day,” he said.

Last month, Macy’s forecast earnings of $4.40 to $4.50 a share for the year through January 2015. The average analyst average estimate is $4.45. The company reaffirmed that forecast today, as well as its projection for a 2.5 percent to 3 percent gain in comparable sales this year.

As part of the cost reductions, Macy’s is combining its Midwest and North operations. It’s also eliminating some merchandise planning and store positions, as well as central office and administrative jobs. The company said its workforce will remain at about 175,000 employees as it adds staff elsewhere. The job reductions and other actions will save about $100 million a year, starting this year.

Macy’s ranks second to Sears Holdings Corp. in the U.S. department-store industry, measured by revenue.

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