Macy’s Q3 tops Street but sales lag; cuts full-year outlook

Cincinnatti --The uncertain retail environment caught up Macy's Inc. in the third quarter, with the department store retailer reporting a mixed bag of results that included a 23% increase in its fiscal third quarter profit amid a drop in expenses. But the retailer cut its annual profit outlook because of unexpectedly slow sales.



For the period ended Nov. 1, Macy's earned a better-than-expected $217 million, up from $177 million a year earlier.



Revenue edged down 1% to $6.2 billion from $6.28 billion, missing Wall Street's forecast of $6.34 billion. Same-store sales (exclusive of licensed businesses) fell 1.4%.



“We are very pleased with our third quarter earnings, even though the sales performance fell short of our expectations. On a two-year basis, our third quarter sales trend was essentially unchanged from the first half of 2014. We knew we were up against very strong third quarter sales growth for our company last year, and thus we had anticipated that our year-over-year comparison would be lower in the third quarter than in the fourth quarter,” said Terry J. Lundgren, chairman and CEO of Macy’s, Inc.



Analysts pointed out that Macy’s maintained its gross margins in the third quarter, which signals that the chain isn’t relying heavily on discounts to boost sales.



Despite its unexpectedly disappointing sales performance, Macy’s is remaining optimistic about the holiday season, forecasting 1.8% to 2.8% comparable store sales growth during the fourth quarter. Among other factors that bode well for the chain are new omnichannel marketing strategies, updated merchandise assortment, and “ a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year,” Lundgren said.