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Macy's Sees Profit Slip, Lowers Estimates For Year

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The Associated Press

Published: August 14, 2008

NEW YORK - Macy's Inc. saw its second-quarter earnings drop slightly and warned on Wednesday that full-year profits will be below Wall Street expectations as shoppers are more cautious about spending.

The department store operator earned $73 million, or 17 cents per share, in the quarter ended Aug. 2, compared with $74 million, or 16 cents per share, a year earlier.

This year's results include two unusual items that cut earnings by 12 cents per share. Excluding those items, Macy's earned 29 cents per share from continuing operations.

Revenue fell 3 percent to $5.7 billion from $5.9 billion. Macy's says that same-store sales, or sales at stores opened at least a year, dropped 2.1 percent. Same-store sales are considered a key indicator of a retailer's health.

Analysts surveyed by Thomson Reuters had expected earnings of 19 cents per share on revenue of $5.75 billion.

Macy's results came as the Commerce Department reported that July's retail sales were the weakest in five months as economic problems, from high gas prices to tighter credit and a weaker job market, combined to blunt the impact of billions of dollars in government stimulus payments to U.S. households. The monthly report showed that sales at department stores and other general merchandise stores rose by 0.3 percent, just half the 0.6 percent of the June increase.

"Our organization rose to the challenge and delivered strong second-quarter earnings and cash flow, despite the poor economic environment," Terry J. Lundgren, Macy's chairman, president and chief executive, said in a statement. "While we are never fully satisfied when sales are down, we continued to outperform most of our major competitors in same-store sales and to gain market share with a combination of differentiated merchandise, current fashions and great value."

Like other apparel chains, Macy's is confronting a slowdown in clothing sales as shoppers focus on basics.

Lundgren noted that he expects to see "a positive impact" on sales beginning in spring amid new merchandising initiatives. Starting this fall, Macy's will be the exclusive department-store retailer for Tommy Hilfiger U.S.A. men's and women's sportswear. In May, it announced a partnership with toy retailer FAO Schwarz, and plans to open stores in close to 700 Macy's department stores over the next two years. About 75 full-size FAO toy stores will open across the country this fall.

Macy's said that it expects same-store sales in the fall season to be unchanged or down 1 percent, which would result in same-stores sales declines of as much as 1.6 percent for the year.

Shares in Macy's closed at $20.66, up 39 cents, or almost 2 percent, Wednesday.

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