By Allison Prang
After closing dozens of unprofitable stores, Macy's Inc. reported higher sales at those locations still open amid the first signs that the department store giant is pulling out of a prolonged slump.
The results were buoyed by a strong economy, with low unemployment and recent tax cuts that should give consumers more money to spend.
A big driver of the sales increase was a promotional event that shifted into this year's first quarter, compared with last year, when it occurred during the second quarter. Stripping out this event, same-store sales on an owned plus licensed basis would have risen 1.7%, according to Neil Saunders, managing director of GlobalData Retail, a research firm.
Shares in Macy's shot up 7.8% before the market opened Wednesday after the retailer reported same-store sales growth that widely surpassed analysts' estimates and raised its projections for the year.
Macy's said same-store sales rose 3.9% compared with the same quarter the year before. Analysts polled by Consensus Metrix were expecting same-store sales to increase 0.3%. Including licensed stores, same-store sales at Macy's rose 4.2%, while analysts expected an increase of 1%.
Macy's said it now expects to earn between $3.75 and $3.95 a share on an adjusted basis, a range 20 cents higher than its prior guidance. The company also raised the prospects of seeing annual sales growth. The department-store chain now expects annual sales to be in a range of down 1% to up 0.5% from its prior forecast of sales falling between 0.5% and 2%.
Chief Executive Jeff Gennette said in prepared remarks that Macy's "saw continued healthy consumer spending and significant improvements in international tourism."
Macy's revenue rose 3.6% to $5.54 billion. Analysts polled by Thomson Reuters were expecting revenue of $5.37 billion. At the same time, cost of sales at the company rose 2.4% to $3.38 billion.
Profit climbed 78% to $139 million, or 45 cents a share. On an adjusted basis, the company earned 48 cents a share.
Analysts polled by Thomson Reuters were expecting Macy's to report a profit of 37 cents a share on an adjusted basis.
Mr. Gennette said at a conference in March that Macy's Backstage, the company's discount concept, has helped some Macy's store sales and that the company wants to bring Macy's Backstage to the West Coast. In the first quarter, Macy's opened about 20 of these stores. It had planned to open 100 this fiscal year.
The company also said earlier this month it bought a New York City concept store called STORY which changes up what it is selling and its design every four to eight weeks. Macy's also said that STORY's CEO and founder Rachel Shechtman will become a brand experience officer at Macy's.
Separately, Macy's said it has ended its joint venture with Fung Retailing Ltd. in China, but would remain on Alibaba's TMall platform.
Macy's is also in line for a new chief financial officer. In early April, the company said CFO Karen Hoguet will retire. She will remain CFO until a new executive is appointed to take over her role, but she will stay as an adviser until February. Macy's has hired a search firm to help look for a new CFO.
Write to Allison Prang at [email protected]