Macy's profit falls, but retailer raises outlook

NEW YORK - Macy's Inc. posted a second-quarter profit and beat Wall Street expectations even as the department store chain's results were weighed down by costs for consolidations and store closings.

The Cincinnati-based chain said Wednesday it is boosting its profit outlook as it benefits from the cost-cutting.

Macy's earned $7 million, or 2 cents per share, in the quarter ended Aug. 1. That compares with $73 million, or 17 cents per share, in same period last year.

But excluding restructuring charges of $34 million, or 18 cents per share, related to division consolidations and initiatives to localize merchandising to regional markets, the company earned 20 cents per share. That well exceeded the 15 cents projects by analysts surveyed by Thomson Reuters.

Revenues were $5.16 billion, down almost 10 percent from a year ago, slightly below analysts' forecasts of $5.18 billion. Macy's same-store sales, or sales at stores opened at least a year, were down 9.5 percent. Same-store sales are considered a key indicator of a retailer's health.

"Our unified organizational structure is settling in and working well," said Terry J. Lundgren, Macy's chairman, president and chief executive, in a statement. "It has allowed us to streamline decision-making and build closer relationship with our key vendor resources."

Department stores are facing big challenges as shoppers — worried about job security, tight credit and slumping home prices — keep their focus on basics like food. While there are signs of stabilization, business remains weak.

Macy's has been shoring up profits with aggressive cost-cutting. It announced in February that it will eliminate 7,000 jobs, almost 4 percent of its work force; it also cut capital spending, reduced its contributions to its employees' retirement funds and slashed its dividend to preserve cash.

The moves follow Macy's announcement in January — on the heels of the worst holiday season in decades — that it would close 11 stores, affecting 960 employees.

Last year, it began rolling out a program to localize merchandising to regional markets.

Macy's said Wednesday that it expects same-stores sales to be down in the range of 5 percent to 6 percent. That would result in a same-store sales decline of between 7 percent and 7.5 percent for the full year. That's within company's internal guidance of a drop of between 6 percent and 8 percent.

The company said that it now expects earnings per share for the full year to be anywhere from 70 cents to 80 cents per share, excluding restructuring charges. That's an increase from the earlier projected range of 40 cents to 55 cents. Analysts surveyed by Thomson Reuters expect profit of 79 cents per share.

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