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 earnings beat Wall Street expectations and Macy’s raised its full-year guidance Wednesday.
The company, which also operates upscale Bloomingdale’s in addition to its namesake chain, sounded an optimistic tone for the holiday season despite disruptions from Superstorm Sandy . Sandy slammed the Northeast and Mid-Atlantic regions two days after Macy’s closed its books on the quarter.
Macy’s Inc., a standout among its peers throughout the economic recovery, is the first of the major retailers to report third-quarter results that should provide insight into Americans’ mindset heading into the crucial holiday season.
Analysts will be looking for commentary on how shoppers are being affected by Sandy, which caused disruptions to businesses and households. Shoppers are already dealing with a still slow economic recovery. Sandy may have added to their troubles.
The fear: consumers who are now being forced to buy cleanup supplies and pay for expensive repairs in the aftermath of the storm may feel less inclined to spend for the holidays.
However, Macy’s chairman, president and chief executive Terry Lundgren was upbeat despite the challenges ahead.
“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,” Lundgren said in a statement. He said Macy’s will be offering “new and fresh merchandise” assortments and “an engaging shopping experience” throughout the holiday season.
Macy’s has been catering to local customers in a way that had been lacking since the chain ditched its numerous 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.
Analysts also say 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 Inc. 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 expects to post earnings for the full year of $3.35 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 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.
Shares rose 36 cents to $41.74 in morning trading Wednesday. They are near their 52-week high of $42.17 set in early May.
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 climb 4.2 percent in the fourth quarter.
Also last week, Macy’s said that 200 of its stores, including Bloomingdale’s, were closed at some point during regular hours because of Superstorm Sandy. The closings ranged from just a few hours to days. But the department store chain said last week it expects to make up some or most of its lost sales through the remainder of the fourth quarter.