NEW YORK, N.Y. – Macy’s Inc. reported a 20 per cent increase in first-quarter profit even though cool temperatures and economic worries dampened some of its shoppers’ spending on spring clothes.
The company, which also operates the upscale chain Bloomingdale’s, is also raising its dividend to 25 cents from the current 20 cents. It also announced an additional $1.5 billion in stock buybacks.
Macy’s, a standout among its peers throughout the economic recovery, is the first of the major retailers to report first-quarter results that should provide insight into Americans’ mindset heading into the summer season. The latest results show that while the job market is improving and housing market is recovering, Macy’s and others that cater to middle-income shoppers still face hurdles.
“We are especially pleased with our first-quarter sales and earnings performance given the challenges we overcame in this period,” Terry Lundgren, chairman, president and CEO of Macy’s, said in a statement.
Like many clothing retailers, Macy’s grappled with cool spring weather that lingered into April. But Lundgren also pointed to weak spending trends among the chain’s most budget-conscious shoppers as well as among its higher-income Bloomingdale’s customers.
Macy’s has been benefiting from its strategy of tailoring merchandise to local markets. The department store chain has also pulled in young shoppers by aligning with celebrities like Madonna and Jessica Simpson. But the company also said it will seek out new opportunities to get shoppers to spend.
Analysts say that Macy’s is benefiting from the troubles at rival J.C. Penney, which is set to announce its fifth straight quarter of sharp sales drops as it reels from strategies spearheaded by its former CEO Ron Johnson, who was ousted in April. Under Johnson,
Penney got rid of most sales, a move that turned off shoppers. Under its new CEO Mike Ullman, who was Johnson’s predecessor, Penney is adding back sales and coupons, but it’s not clear whether shoppers who have left will return.
Penney is scheduled to announce first-quarter results late Thursday.
Separately, Penney and Macy’s are also locked in a legal battle over a partnership with home maven Martha Stewart. Macy’s, which has had an exclusive merchandising contract with the home maven since 2006 in such products as bedding and bath items, sued Martha Stewart and Penney after they signed a deal in December 2011 to develop mini Martha Stewart shops.
After several weeks of heated testimony, a New York State Supreme Court judge is expected to hear closing arguments from the lawyers in a few weeks and will make his final decision after that.
Despite Penney’s woes, Macy’s latest results show that while profits were up, revenue came in slightly short of analysts’ estimates.
Macy’s said it earned $217 million, or 55 cents per share in the quarter ended May 4. That compares with $181 million, or 43 cents per share, a year ago.
Revenue rose 4 per cent to $6.38 billion.
Analysts expected earnings of 53 cents per share on revenue of $6.4 billion, according to FactSet.
Revenue at stores open at least a year rose 3.8 per cent. Analysts had expected an increase of 4.3 per cent.
Macy’s said it expects revenue at stores open at least a year to rise 3.5 per cent for the year. It also reiterated that it expects earnings per share for the full year to be in the range of $3.90 to $3.95.
Analysts had expected $3.92 per share.
The company said the dividend will be paid on July 1 to shareholders of record at the close of business on June 14.
Macy’s shares rose 2.5 per cent, or $1.18 per share, to close at $48.57 Wednesday.