Macy’s swings to $44 million loss in 3rd quarter
NEW YORK – Macy’s Inc. swung to a loss in the third quarter as sales dropped more than 7 percent, with the retailer saying the holiday season would be a “nailbiter” and it saw no benefit in being optimistic for next year.
The department store operator also said Wednesday it slashed its budget for 2009 capital expenditures by almost half as it navigates the deteriorating economy. Macy’s reiterated its profit outlook for the year, but said it would be at the low end of the range if current sales trends continue.
As for the upcoming holiday season, “it will be a nailbiter,” Chief Financial Officer Karen Hoguet told analysts in a conference call. She also noted that Macy’s planned to have inventories for spring and fall 2009 below last year’s levels, saying, “We don’t see an upside in being optimistic.”
Shares in the Cincinnati-based chain fell 49 cents, or more than 5 percent, to $8.92.
Macy’s said it lost $44 million, or 10 cents per share, in the quarter, after a profit of $33 million, or 8 cents per share, a year earlier. Excluding costs related to the consolidation of three regional divisions that totaled $16 million — $10 million after tax or 2 cents per share — the third-quarter loss was 8 cents per share.
Sales fell to $5.49 billion from $5.9 billion. Analysts surveyed by Thomson Reuters were expecting, on average, a loss of 19 cents on $5.49 billion in sales.
“Macy’s Inc. remains financially healthy, with strong cash flow, a solid balance sheet and ample borrowing capacity,” Chairman and Chief Executive Terry J. Lundgren said in a statement. “We are committed to continuing to aggressively manage expenses and inventories consistent with planned sales levels.”
Despite its weaker results, Macy’s has performed better than most of its major competitors in sales at established stores. For October, Macy’s reported a same-store sales drop of 6.3 percent, while rival J.C. Penney Co. suffered an 11.8 percent drop and Dillards Inc. saw an 8 percent drop. Lundgren added that even in a “poor economic environment,” he’s confident in the company’s strategies for gaining market share. Its effort to localize stores more is yielding “promising early results,” he said, and expects that strategy to have a more profound impact in 2009.
Macy’s announced a reorganization in February that dispersed more managers to local markets. As part of the plan, the company combined three regional divisions and slashed about 2,300 management jobs.
The company expects earnings in the range of $1.30 to $1.50 per share this year, and $1.10 to $1.30 per share in the fourth quarter. Analysts surveyed by Thomson Reuters forecast $1.37 per share for the year, and $1.24 per share in the fourth quarter. Meanwhile, to differentiate itself from its rivals, Macy’s is expanding its offerings in exclusive merchandise.
This past fall, it became the exclusive department store retailer for Tommy Hilfiger U.S.A. men’s and women’s sportswear. It also has a partnership with FAO Schwarz to open toy stores in close to 700 Macy’s stores across the country; about 75 full-size FAO toy stores have opened in the department store chain this fall.