US retailer rings up healthy Q4 earnings

Department store operator Macy's Inc posted a better-than-expected quarterly profit on Tuesday (local time) as gross margin improved, sending its shares up 6 percent.

Investors took heart in Macy's profit, despite sales that languished in the quarter, as shoppers continued to hold on to their spare dollars and cut their trips to malls.

The operator of its namesake and Bloomingdale's chains has struggled to boost sales in recent months at former May Department Stores, which it bought in 2005 and converted to the Macy's name.

US shoppers have added to its trouble in the period - hard-pressed for cash in a shaky economic environment, they have become more bargain conscious and reserved their spare dollars for pricier everyday items such as food and fuel instead.

The cutback has affected several US department store operators.

For instance, J.C. Penney Co Inc posted a drop last week in quarterly profit and sales and said it did not see any indication the consumer environment would improve in 2008.

Macy's Chief Financial Officer Karen Hoguet noted on a conference call that 2008 would be a challenging year for retailers. Still, Stephanie Hoff, a senior retail analyst at Edward Jones, said she was pretty bullish on Macy's overall.

"While the consumer spending environment is weak right now, I think Macy's is taking prudent strategies and trying to grow the business," she said.

Macy's profit rose 2.3 percent to $750 million, or $1.73 a share in its fiscal fourth quarter ended Feb 2, compared with $733 million, or $1.40 a share, a year earlier.

Integration costs were 10 cents per share and a non-cash tax credit came to 18 cents a share in the quarter.

Excluding those items, Macy's earned $1.65, topping analysts' average expectation of $1.60 a share, according to Reuters Estimates.

Gross margin was up at 41.6 percent from 40.8 percent.

"While most department store operators have posted upside via tighter SG&A (selling, general and administrative) this earnings season (mostly due to lower compensation costs) (Macy's) beat on gross margin is a standout," Goldman Sachs analyst Adrianne Shapira said in a note.

Sales fell 6.2 percent to $8.6 billion. Same-store sales, which track sales at stores open at least one full fiscal year, fell 2 percent in the quarter.

Hoguet said inventory was down 5 percent compared with a year ago and "in good shape" for 2008.

Earlier this month, Macy's said it would close several regional division headquarters and cut about 2,300 jobs and in December, said it would close nine underperforming stores in markets such as Indiana, Louisiana and Texas.

The restructuring is expected to reduce its expenses while also reviving its sales.

Agencies

(China Daily 02/28/2008 page16)