Macy’s Tops Earnings Estimates as Company Shrinks FootprintBy
Sales decline wasn’t as sharp as expected in fourth quarter
Department-store giant gets new CEO Gennette next month
Macy’s Inc. posted fourth-quarter earnings that beat analysts’ estimates as the company closes stores and cuts costs in a bid to cope with an industrywide slump.
Profit was $2.02 a share, excluding some items, the Cincinnati-based company said on Tuesday. Analysts projected $1.96 on average. While same-store sales declined 2.1 percent, that was better than the 2.2 percent drop predicted by analysts.
The results offered hope that Macy’s can pull out of a downturn that has rocked the largest U.S. department-store chain. The company has been slashing costs, closing stores and trying to squeeze money out of its real estate portfolio. Still, it’s facing mounting pressure from activist investor Starboard Value LP and has held early-stage talks with rival Hudson’s Bay Co. about a possible takeover, according to people familiar with the matter.
It’s also facing a transition at the top. President Jeff Gennette is taking over as chief executive officer from longtime leader Terry Lundgren on March 23.
“While 2016 was not the year we expected, we made significant progress on key initiatives that are starting to bear fruit,” Lundgren said in a statement.
Macy’s rose as much as 2.8 percent to $33.21 Tuesday in New York. The stock had slid almost 10 percent this year through Friday.
Macy’s previously announced plans to close 100 underperforming stores, with 68 of those shutting down this year. That move will eliminate about 4,000 jobs, in addition to the 6,200 announced in January.
The drive to cut costs should generate annual savings of $550 million, beginning in 2017, Macy’s said. That’s higher than a previous goal of $500 million announced in 2015. The plan is to pump the savings into its e-commerce business, Chinese operations and other units, such as its Bluemercury makeup division.
Macy’s is also looking for more real estate transactions, which generated about $673 million in cash proceeds last fiscal year, according to the statement. The company hired Brookfield Asset Management to have the exclusive right for two years to create a development plan for about 50 pieces of Macy’s real estate. The holdings include stores and land that Macy’s owns or ground-leases -- most of which are in shopping centers that aren’t owned by major mall owners.
“We are also developing strategies that will help create value for Herald Square while making the store an even more vibrant retail experience,” Lundgren said in the statement, referring to the flagship Manhattan property.