Macy's Tops Forecast, Backs View

Macy's (M Quote) fourth-quarter earnings edged past analysts' lowered expectations, and the department-store giant backed its profit forecast for the coming year.

The company on Tuesday reported fourth-quarter net income of $750 million, or $1.73 a share, up from $733 million, or $1.40 a share, a year earlier.

The results included $43 million in costs tied to Macy's 2005 acquisition of May Department Stores, as well as a $78 million tax credit. Excluding these items, earnings were $1.65 a share, up from $1.60 a share on a comparable basis a year ago.

Analysts had forecast earnings of $1.60 a share, before items, for the latest quarter, according to Thomson Financial. Those estimates had been scaled down earlier this month, when Macy's slashed its profit forecast amid a broad retail malaise as shoppers cut back on spending in the holiday season.

Macy's sales for the quarter fell to $8.59 billion from $9.16 billion a year earlier. The latest quarter had 13 weeks, while the prior-year period consisted of 14 weeks.

Same-store sales, or sales at stores open at least a year, dropped 2%.

Against the sales weakness and Macy's ongoing efforts to integrate May stores, the company said earlier this month that it would reorganize its structure and cut roughly 2,550 jobs.

"While a weakened economic environment led our industry to softer financial results than initially expected, Macy's, Inc. did outperform most of our primary competitors in the fourth quarter," said Terry Lundgren, chairman, president and chief executive. "We also generated significant cash flow despite weaker-than-expected sales trends. Going forward, we are aggressively pursuing our recently announced market localization initiative to drive future sales and earnings."

Macy's reiterated its forecast, given earlier this month, for earnings of $1.85 to $2.15 a share, before charges, for the current fiscal year. The company expects same-store sales to be down 1% to up 1.5%.

Wall Street anticipates fiscal-year earnings of $2.03 a share.