Macy’s Forecasts Profit That Tops Estimates Amid Job CutsCotten Timberlake
Macy’s Inc., the second-largest U.S. department-store company, forecast profit for its next fiscal year ahead of analysts’ estimates and disclosed a program to cut costs that includes eliminating about 2,500 jobs.
Profit per share in the year through January 2015 will be $4.40 to $4.50, the Cincinnati-based company said in a statement yesterday. The average of 19 analysts’ estimates compiled by Bloomberg was $4.36. The job cuts and other actions will save about $100 million a year, Macy’s said in a separate statement.
At a time when many retailers are struggling with restrained consumer spending, Macy’s Chief Executive Officer Terry Lundgren has kept profit growing by adding competitively priced exclusive merchandise and letting lower-level managers tailor assortments to local tastes. He’s also increased online sales by fulfilling Web orders from store inventory.
“They are running a good business and hats off,” Richard Jaffe, an analyst at Stifel Financial Corp., said in a phone interview. “The fact that they can take $100 million of costs out of the equation is a nice thing. You can increase earnings by reducing costs. I’ll take it.” Jaffe has a buy rating on the stock.
Macy’s rose 7.6 percent to $55.80 at the close in New York. The retailer’s stock jumped 37 percent last year.
The department-store chain maintained its forecast that profit per share in the current fiscal year would rise to $3.80 to $3.90, excluding charges related to its cost reduction measures and asset impairments. Sales at stores open at least a year will rise 2.3 percent to 2.5 percent in the fourth quarter, Macy’s said. Analysts’ estimated 2.7 percent, on average.
The retailer plans to report fourth-quarter results on Feb. 25.
The cost reductions entail combining its Midwest and North regions, eliminating some merchandise planning and store positions as well as central office and administrative jobs. The company also will close five stores in Arizona, Kansas, Missouri, New York and Utah. Macy’s said its workforce will remain at about 175,000 employees as it adds staff in other parts of the company.
The savings will take effect in the next fiscal year after $120 million to $135 million of charges in the fourth quarter, Macy’s said.
Comparable sales for the period of November and December rose 3.6 percent from a year earlier, the company said.
“Macy’s has dominated the retail scene and gained share over other retailers by giving consumers the promotions they wanted,” Walter Loeb, founder of a namesake New York retail consulting firm, said in a telephone interview yesterday. “Cutting back is also a recognition that technology has worked satisfactorily at Macy’s and that a lot of their new business comes from the Internet.”
Macy’s shares advanced 37 percent last year, compared with a 30 percent gain for the Standard & Poor’s 500 Index.
Sears Holdings Corp. is the largest U.S. department-store company by revenue.