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VOL. 36 | NO. 44 | Friday, November 02, 2012

Macy's 3Q net income rises 4.3 pct, tops estimates

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NEW YORK (AP) — Macy's posted a 4.3 percent increase in third-quarter net income, helped by the department store owner's efforts to tailor merchandise to local markets and bring in trendy exclusive brands.

The Cincinnati, Ohio-based retailer's earnings beat Wall Street expectations and it raised its full-year guidance.

The company, which also operates upscale Bloomingdale's in addition to its namesake chain, sounded an optimistic tone for the holiday season despite disruptions from Superstorm Sandy, which slammed the Northeast and Mid-Atlantic regions two days after the company closed its books on the quarter.

Macy's Inc., which has been a standout among its peers throughout the economic recovery, is the first of the major retailers set to report third-quarter results that should provide insight into how Americans are spending heading into winter holidays. Analysts will be looking for clues from executives on how shoppers are being affected by Sandy, which caused disruptions to businesses and caused massive flooding and power outages. At a time when shoppers are already dealing with a still slow economic recovery, Sandy could add to shoppers' troubles. The fear is that shoppers who are now being forced to buy cleanup supplies and do expensive repairs in the aftermath of the storm may feel less inclined to spend for the holidays.

However, Macy's chairman, president and chief executive Terry Lundgren was upbeat despite the challenges ahead.

"We have confidence in our ability to continue to grow sales and earnings in the fourth quarter, even taking into account a recovery from Hurricane Sandy that will cause stress to consumers and our employees in the Northeast and Mid-Atlantic regions," said Lundgren in a statement. He noted that throughout the holiday season, Macy's will be offering "new and fresh merchandise" assortments and "an engaging shopping experience."

Macy's has been catering to local customers in a way that had been lacking since the chain ditched its numerous regional nameplates such as Marshall Field's and Hecht's. That means focusing on tailoring merchandise to local markets, like offering more business suits in Washington D.C.

The company has also been doing well with its exclusive brands including Material Girl, a teen brand that is a collaboration with Madonna's teenage daughter Lola.

Analysts also believe that it is benefiting from the troubles at rival J.C. Penney, which implemented on Feb. 1 a new pricing plan that hasn't yet resonated with shoppers. The plan involves dumping hundreds of sales events in favor of every day lower pricing. Penney is expected to report its third consecutive quarter of losses and slumping sales on Friday when it reports its third-quarter results.

Macy's Inc. said Wednesday that it earned $145 million, or 36 cents per share, for the three-month period ended Oct. 27. That compares with $139 million, or 32 cents per share, in the year-ago period.

Revenue rose 3.7 percent to $6.07 billion. Revenue at stores open at least a year rose 3.7 percent and is considered a key indicator of a retailer's health.

Analysts polled by FactSet had expected 29 cents per share on revenue of $6.07 billion.

Macy's said it now believes that it will post earnings for the full year of $3.35 per share to $3.40 per share. This is the second time Macy's has raised its profit guidance. In August, it had upgraded its earnings projections to $3.30 to 3.35, from an earlier projection of $3.25 per share to $3.30 per share.

Analysts had expected $3.39 per share for the year.

Macy's also believes it will earn anywhere from $1.94 to $1.99 per share for the fourth quarter. Analysts expected $2.05 per share.

Investors may have been hoping for even more. Macy's shares slipped 27 cents to $41.11 in premarket trading.

Macy's said last week that revenue at stores open at least a year should rise 4 percent in the second half of the year, up slightly from prior guidance of a 3.7 percent increase. It expects the figure to rise 4.2 percent in the fourth quarter.