Macy's turnaround plans are taking hold, marking a positive sign for the overall retail industry, and the company expects the momentum to continue into 2018.
In an interview Tuesday with CNBC, CEO Jeff Gennette said same-store sales were up 3 percent in January, as the company had fresher merchandise in stores and less carryover from the holidays.
The department store chain Tuesday morning reported earnings and same-store sales for the fiscal fourth quarter that topped analysts' expectations, as investments in a more personalized loyalty program, fewer flash sales and a trimming of real estate are starting to pay off.
Macy's also said it will be accelerating initiatives related to its stores, technology and merchandising to return the business to same-store sales growth for the current year. Same-store sales for fiscal 2017 were down 2.2 percent.
Macy's stock rose more than 12 percent Tuesday morning on the news. The stock was last trading up about 5 percent.
Here's what Macy's reported for the fourth quarter of fiscal 2017 compared with what analysts were expecting, based on a survey by Thomson Reuters:
- Earnings per share: $2.82, adjusted, vs. $2.71 expected
- Revenue: $8.67 billion vs. $8.68 billion expected
- Same-store sales: a 1.3 percent increase vs. growth of 0.1 percent expected
"We were disciplined with our promotional cadence and maintained a good inventory position," Gennette said in a statement regarding Macy's performance during the fourth quarter. "We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy's to growth."
Macy's reported net income of $1.33 billion, or $4.31 a share, compared with $475 million, or $1.54 per share, a year ago. The company said its earnings were boosted by 7 cents a share due to new U.S. tax legislation.
Excluding one-time items, Macy's earned $2.82 a share, topping Street estimates of $2.71 per share.
Revenue for the fourth quarter climbed 1.8 percent to $8.67 billion, falling just slightly short of analysts' estimates of $8.68 billion. Same-store sales were up 1.3 percent, Macy's said, surpassing analysts' expectations for growth of 0.1 percent.
Looking to fiscal 2018, Macy's is expecting earnings for the year to be within a range of $3.55 to $3.75 per share. The retailer is calling for same-store sales to be flat to up 1 percent, as total revenue is predicted to fall between 0.5 percent and 2 percent.
"I think this is a bit of a turning point for the retail sector," Telsey Advisory Group's Dana Telsey told CNBC on the heels of Macy's earnings report. "I think it's a bigger story."
Macy's, like most of its department store peers, started 2018 on a high note, coming off a stronger holiday season than the prior year. The company has benefited from colder weather and a handful of snowstorms across the U.S., hiking demand for winter apparel and accessories.
Some of Macy's biggest initiatives to boost profits include opening pop-up shops, testing more off-price locations under the Backstage brand and exploring other opportunities with its real estate with Brookfield Asset Management.
Macy's said Tuesday that it recently signed an agreement with Brookfield to sell seven floors of one of its stores in Chicago to be converted into office space. Its asset sales totaled $411 million in cash proceeds in fiscal 2017.
The department store chain added it "continues to opportunistically evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations."
To date, the company has closed 83 stores as part of a plan announced in August 2016 to shutter 100 locations in a bid to trim expenses and reinvest in the overarching business.
Including Tuesday's gains, Macy's shares have climbed more than 14 percent so far this year.