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Macy’s 3Q net income rises, sees hurricane rebound

In this Feb. 20 2011 phooutside Macy's store is shown Dallas. Macy's Inc.'s fiscal fourth-quarter net income surged 50 percent

In this Feb. 20, 2011 photo, the outside of a Macy's store is shown in Dallas. Macy's Inc.'s fiscal fourth-quarter net income surged 50 percent, driven by a strong holiday selling season. Macy's is reporting Wednesday, Nov. 7, 2012, a 4.3 percent increase in third-quarter net income, helped by the department store owner's efforts to tailor merchandise to local markets and bring in trendy exclusive brands. (AP Photo/LM Otero)

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Updated: November 7, 2012 1:32PM



Macy’s will extend deals for victims of Hurricane Sandy, which shuttered 200 of the retailer’s 840 stores for various periods, and is expecting a bounceback for the holidays, a company executive said Wednesday.

All but one Macy’s store has reopened — the exception a furniture gallery in Wayne, N.J. with no electricity — and the company expects no long-term effects from the superstorm, Chief Financial Officer Karen Hoguet told analysts during an earnings call.

The biggest challenges have been shoppers’ lack of transportation and a change in priorities to home repairs and essential needs rather than gifts and fashion, she said.

Macy’s is offering a 20-percent “recovery” coupon for storm victims, and Macy’s and sister store Bloomingdale’s will extend upcoming weekend sales into next week.

Analyst Brian Yarbrough at St. Louis-based Edward Jones said Hurricane Sandy will hurt Macy’s sales in November, but the exact impact has yet to be seen. The storm hit two days after Macy’s closed the books on third-quarter results.

Macy’s CEO Terry Lundgren expressed optimism and analysts pointed out that the Cincinnati, Ohio-based retailer has been a standout among its peers throughout the economic recovery.

“We have confidence in our ability to continue to grow sales and earnings in the fourth quarter, even taking into account a recovery from Hurricane Sandy that will cause stress to consumers and our employees in the Northeast and Mid-Atlantic regions,” said Lundgren in a statement. He noted that throughout the holiday season, Macy’s will be offering “new and fresh merchandise” assortments and “an engaging shopping experience.”

Macy’s has been catering to local customers in a way that had been lacking since the chain ditched its regional nameplates such as Marshall Field’s and Hecht’s. That means focusing on tailoring merchandise to local markets, like offering more business suits in Washington D.C.

The company has also been doing well with its exclusive brands including Material Girl, a teen brand that is a collaboration with Madonna’s teenage daughter Lola.

Macy’s also is beating its peers in online sales, with third-quarter e-commerce accounting for 2.2 percent of its total 3.7 percent same-store sales jump compared with rival retailers’ online boosts of up to about 1 percent, Yarbrough said.

“Macy’s Internet presence is bigger than other retailers, and it gets more profit and bigger-ticket sales online than from its in-store sales,” he said.

Meanwhile, Macy’s posted a 4.3 percent increase in third-quarter net income, helped by the department store owner’s efforts to tailor merchandise to local markets and bring in trendy exclusive brands.

The company’s earnings beat Wall Street expectations and it raised its full-year guidance.

Macy’s is the first of the major retailers to report third-quarter results that should provide insight into how Americans are spending heading into winter holidays.

Analysts also believe that Macy’s is benefiting from the troubles at rival J.C. Penney, which implemented on Feb. 1 a new pricing plan that hasn’t yet resonated with shoppers. The plan involves dumping hundreds of sales events in favor of every day lower pricing. Penney is expected to report its third consecutive quarter of losses and slumping sales on Friday when it reports its third-quarter results.

Macy’s said Wednesday that it earned $145 million, or 36 cents per share, for the three-month period ended Oct. 27. That compares with $139 million, or 32 cents per share, in the year-ago period.

Revenue rose 3.7 percent to $6.07 billion. Revenue at stores open at least a year rose 3.7 percent and is considered a key indicator of a retailer’s health.

Analysts polled by FactSet had expected 29 cents per share on revenue of $6.07 billion.

Macy’s said it now believes that it will post earnings for the full year of $3.35 per share to $3.40 per share. This is the second time Macy’s has raised its profit guidance. In August, it had upgraded its earnings projections to $3.30 to 3.35, from an earlier projection of $3.25 per share to $3.30 per share.

Analysts had expected $3.39 per share for the year.

Macy’s also believes it will earn anywhere from $1.94 to $1.99 per share for the fourth quarter. Analysts expected $2.05 per share.

Investors may have been hoping for even more. Macy’s shares slipped 27 cents to $41.11 in premarket trading.

Macy’s said last week that revenue at stores open at least a year should rise 4 percent in the second half of the year, up slightly from prior guidance of a 3.7 percent increase. It expects the figure to rise 4.2 percent in the fourth quarter.

— Contributing: Associated Press



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