Macy's 59% Profit Drop In Fourth Quarter

NEW YORK — Macy's Inc. reported an almost 59 percent drop in fourth-quarter earnings Tuesday as its results were dragged down by weak sales and one-time costs associated with the consolidations of regional divisions and store closings.

The Cincinnati-based company, which announced this month that it will eliminate 7,000 jobs, said that in the three months ended Jan. 31, it earned $310 million, or 73 cents per share. That compares with $750 million, or $1.73 per share, a year earlier.

Sales fell 7.7 percent to $7.93 billion from $8.59 billion a year ago. Same-store sales, or sales at stores opened at least a year, fell 7 percent. Same-store sales are considered a key indicator of a retailer's health.

Among the best-selling items were shoes and housewares, which are more practical, Chief Financial Officer Karen Hoguet told analysts during a conference call. The weakest areas were handbags, watches, luggage, furniture and jewelry, which are more discretionary, she said.

Department stores such as Macy's are facing big challenges as shoppers _ worried about their shrinking retirement funds and job security amid massive layoffs _ are in full retreat and focusing on basics like food.

Macy's announced this month that it will eliminate almost 4 percent of its work force, cut capital spending, reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash. Macy's also announced the national rollout of a plan to localize merchandising to specific markets, which it began in some regions last year.

The moves follow Macy's announcement in January _ on the heels of the worst holiday season in decades _ that it would close 11 stores, affecting 960 employees.

"We have made many tough decisions, and taken what we consider to be bold action to both drive sales, profitability and also to preserve cash," Hoguet said.

Macy's fourth-quarter results included $17 million in expenses associated with the consolidation measures announced last year, $30 million in costs tied to the further moves announced this month and $11 million related to the 11 store closings.

Excluding those one-time items, Macy's earned $1.06 per share. That was above the $1.01 per share estimate from analysts surveyed by Thomson Reuters, who generally exclude one-time factors. Macy's shares rose 89 cents, or 12 percent, to close at $8.29.

Hoguet told investors that the company saw a significant weakening of sales at its more upscale division Bloomingdale's. In the New York City area, which has been hard-hit by the massive layoffs on Wall Street, she said business at both chains has deteriorated further.

Terry J. Lundgren, Macy's chairman, president and chief executive, said in a statement that the company remains "financially healthy," with strong cash flow and ample borrowing capacity. He said it ended the year with $1.3 billion in cash, more than had been planned at the beginning of the year and no borrowings against its $2 billion bank credit agreement.

Macy's reiterated that for the current fiscal year it expects to earn from 40 cents to 55 cents per share, excluding costs tied to restructuring. Analysts surveyed by Thomson Reuters expect 53 cents per share. Macy's also said it still expects same-store sales to fall between 6 percent and 8 percent.

For the year, Macy's earned $280 million, or 66 cents per share, compared with $893 million, or $1.97 per share in the year-ago period. Sales fell 5.4 percent to $24.89 billion from $26.31 billion in the year-ago period.

Comments

[quentint]

Macy's needs to do two major things to help their business:

1. Stop sending out 10 pieces of annoying junk mail advertisements per month that fill our landfills
2. Quit their bait and switch coupon exclusions in which customers make special trips to the store with a coupon only to find out their desired item is an excluded brand , an excluded "special", or one of their nebulous excluded "Everyday Value" items for which the coupon cannot be used.

Not to mention their confusing Macy's Visa Cards that have two balances. One Visa balance and one store balance. If you pay on-line, you may not even pay the right one. Stupid!

[KillTheMessenger]

Macy's is too expensive. They are trying to extract luxury prices for consumer quality goods. Some people fall for it. Some like to shop for the name of it but in reality most of what can be had at Macy's is available cheaper through other retail channels.

[BENNYINSF]

I think Macy's quality has been on a slide for a while. The brand is not what it used to be.

[InfinteShibumi]

Maybe due to the merger with Hecht's.

[wm1066]

It's due to terry lundgren and his corporate raiding policies..­... Never trust anyone that divorces his wife to marry his daughters best friend.

[sandiegoconservative]

Big whoop. You know how much they charge for a customized foundation and powder for make-up? It's insanity! I decided to go with my better half who never buys make-up and wanted to finally get some light make-up to cover what she says is blemishes. I could not believe what they charged for a few minutes of mixing some bottles together!

[MovingtoNorway]

Son bought an overcoat from them a Christmas. Within a week all the buttons fell off. I still wear a coat I bought at Marshall Fields twelve years ago. No problem with the buttons.
Macys sells over priced junk from Asia. Here's hoping they belly up.

[Retrofuturistic]

I stopped shopping at Macy's a long time ago. Their merchandise is nothing but cheap, ill-fitting and ugly junk from Thailand (or a neighbor of Thailand). And shopping there is a major hassle: You have to keep track of numerous coupons and you can never get the discount unless you use your charge card, which I refuse to do.

All of their marketing is designed to get the customer to:
1. buy cheap jink, and
2. use their charge card.

[Wallysmom]

Awwww. This is breaking my heart. 400% mark up on items sold, low wages for sales people...w­here'd the money go? They might have tried not fleecing the public $10 for a pair of socks.

[brandnewstuff]

My Mother and Brother HAD a horrible exeperience at Macy NWHWY in Dallas- The store did not have enough staff -- and it was more a pain in the ass than to be excited over a Macy gift card-

[Dystopic]

I am sure that they have similiar experiences all over Dallas

[AlligatorShuz]

Their sales plummet when they bought out Marshall Fields they thought the people who shopped at Marshall Fields would shop at Macy's and they were wrong. I hate Macy's here in Michigan they have cheap merchandise. I shop at Nodstrom's now.