Macy's Returns to Profits on Localized Merchandising

Macy’s Inc. returned to profitability in the first quarter as the department store operator saw sales pick up on efforts to tailor its merchandise to local markets.

However, the department store operator said it’s too early to further raise its outlook for the year because of economic uncertainty. Shares fell 30 cents to $23.60 in premarket trading.

Macy’s Inc., based in Cincinnati, said Wednesday that it posted net income of $23 million, or 5 cents per share, for the period ending May 1. That compares with a loss of $88 million, or 21 cents per share, in the year-ago period.

Revenue reached $5.57 billion in the quarter. That’s up from $5.19 billion in the last year’s first quarter. Revenue at stores open at least a year rose 5.5 percent. The measure is a key indicator of a retailer’s health because it excludes the effects of expansion.

Analysts surveyed by Thomson Reuters were expecting 5 cents per share on revenue of $5.54 billion.

“Today, we are much better able to anticipate and react to customer needs in each location,” Terry J. Lundgren, Macy’s chairman, president and CEO, said in a statement.“With major changes now behind us, the Macy’s organization has settled in and is hitting a stride in capitalizing on the advantages of (localization).”

Lundgren added that, “while the direction of the overall economy remains unclear, we believe we are well-positioned to continue to gain market share.” He noted the retailer is making plans to expand both the Macy’s and Bloomingdale’s brands including investments in integrating its online business with its stores.

Online sales surged 34 percent, helping to lift revenue at stores open at least a year by 0.9 percentage points during the first quarter.

Bloomingdale’s plans to open a new, smaller store this fall in Santa Monica, Calif., and to launch a Bloomingdale’s outlet with four locations this fall. Such efforts follow Bloomingdale’s opening its first international location in Dubai during the first quarter.

Macy’s localization plan, dubbed My Macy’s, concentrates on putting decisions on what merchandise to stock closer to customers. It seeks to focus Macy’s top talent in local markets and stay on top of trends by grouping Macy’s stores into districts of 10 to 12. That approach has allowed Macy’s to react better to local needs by putting more experienced workers on its sales floors.

Meanwhile, Macy’s last week signed a deal with Sean John, the trendy fashion brand founded by hip hop impresario Sean “Diddy” Combs, to be the exclusive retailer for its men’s sportswear collection. The deal begins next spring.

The move is the latest exclusive for Macy’s, which over the past two years has signed similar arrangements with such labels as Tommy Hilfiger and Ellen Tracy.

Based on accelerating business, Macy’s boosted its earnings outlook on April 27. Macy’s predicts profit to be between $1.75 and $1.80 per share for fiscal 2010, higher than previous guidance for earnings between $1.55 and $1.60 per share.

Analysts surveyed by Thomson Reuters expect $1.87 per share for the year.

The chain also lifted its outlook for 2010 revenue at stores open at least a year last month. The merchant had initially forecast that measure to climb 1 percent to 2 percent but said last month that it now anticipates a 3 percent to 3.5 percent increase.

Macy’s said Wednesday that it’s “premature” to raise annual guidance further given the “macro-economic uncertainty.”

ANNE D'INNOCENZIO, AP Retail Writer NEW YORK