Earnings Slide at May Department Stores

Before items, profit is well short of estimates.
Author:
Publish date:

May Department Stores

(MAY)

, which reportedly has held merger discussions with its chief rival, said Thursday its fourth-quarter earnings sagged on weak sales over the holiday season.

Struggling under the weight of competitive pressure as it looks to replace its recently departed chief executive, May reported earnings of $339 million, or $1.10 a share, down from earnings of $425 million, or $1.38 per share, in the same quarter last year.

Excluding charges from discontinued operations, May earned $1.15 a share, still lower than last year's results and Wall Street's consensus estimate of $1.30 a share, as reported by Thomson First Call. Despite the miss, May shares were recently up 20 cents, or 0.6%, to $31.71.

"While our 2004 results fell short of our expectations, we have implemented a number of strategic and tactical initiatives that are designed to increase our sales and earnings in the present year," said John Dunham, the company's president.

Dunham is acting as May's interim chief executive while the company searches for a candidate to replace Gene Kahn, the former head of the department store operator who resigned abruptly in mid-January.

Shortly after Kahn's departure, media reports said May was in talks with

Federated Department Stores

(FD)

, which operates Bloomingdale's and Macy's department store chains. May, which operates Lord & Taylor, Famous-Barr and Filene's, among others, has held merger talks with Federated in the past, but no agreement was reached.

Both department store companies have felt pressure from the rise of off-mall, discount retailers like

Wal-Mart

(WMT) - Get Report

and

Target

(TGT) - Get Report

, as well as upscale specialty retailers like

Neiman Marcus

(NMG.A)

and

Coach

(COH)

.

In its fourth quarter, May said sales rose to $5.04 billion from last year's $4.49 billion, while sales at stores open at least a year, a key sales measure for retail chains, fell 5.2%.

It also said the integration of its recent acquisition, Marshall Field's, remains on schedule, with the majority of merchandise and financial systems successfully converted. Meanwhile, it has closed 25 of the 32 underperforming Lord & Taylor stores it has planned to eliminate since 2003, and it plans to open eight new department stores this year, as well as unveil 18 David's Bridal shops and 20 After Hours stores.

For all of 2004, May earned $524 million, or $1.70 a share, on sales of $14.4 billion, up from $434 million, or $1.41 a share, on sales of $13.3 billion in 2003.