Macy’s Inc. (M), one of the leading department store retailers in the U.S., recently posted fourth-quarter 2010 results that topped the Zacks expectations.
The quarterly earnings of $1.59 per share outperformed the Zacks Consensus Estimate of $1.51, and rose 17.8% from $1.35 delivered in the prior-year quarter. The quarterly earnings also surpassed management’s guidance range of $1.44 to $1.49 per share.
The Zacks Consensus Estimate rose by a penny prior to the earnings release, with 3 out of 16 analysts covering the stock raising their estimates and 1 analyst lowering the projection in the last 30 days.
On a reported basis, including one-time items, quarterly earnings came in at $1.55 per share compared with $1.05 earned in the year-ago quarter.
Macy’s now expects fiscal 2011 earnings between $2.25 and $2.30, which remains ahead of the current Zacks Consensus Estimate of $2.24. Following this a positive sentiment may be palpable among the analysts, and we could witness a rise in the Zacks Consensus Estimates in the coming days.
The company has been taking prudent steps to increase sales, profitability and cash flows, which include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy’s continues to focus on price optimization, inventory management and merchandise planning.
The Cincinnati, Ohio-based company – Macy’s – said that total sales grew 5.4% to $8,269 million in the third quarter from $7,849 million in the prior-year quarter. However, total revenue missed the Zacks Consensus Estimate of $8,306 million. Comparable-store sales for the quarter jumped 4.3%. Management now expects comparable-store sales growth of 3% in fiscal 2011.
Online sales, which include macys.com and bloomingdales.com, sustained their growth momentum, and were up 29.1% in the quarter, favorably impacting comparable-store sales by 1.1%.
Macy’s, the operator of about 850 department stores, hinted that it is seeking to expand both the Macy’s and Bloomingdale’s brands. During fiscal 2010, the company opened two new Macy’s stores in Palmdale and Tracy, a new Bloomingdale’s store in Santa Monica and four new Bloomingdale’s Outlet stores. During January 2011, the company closed three Macy’s stores in Union City, Chestnut Hill, and Austin.
Despite a 6.1% increase in cost of sales, gross profit in the quarter climbed 4.3% to $3,414 million, aided by top-line growth. However, Macy’s notified that gross profit margin contracted 40 basis points to 41.3%. Adjusted operating income increased 10.3% to $1,169 million, whereas operating margin expanded 60 basis points to 14.1%.
Macy’s ended the quarter with cash and cash equivalents of $1,464 million, long-term debt of $6,971 million, reflecting a debt-to-capitalization ratio of 55.8% and shareholders’ equity of $5,530 million. For fiscal 2011, management now expects capital expenditures of $800 million.
Currently, we have a long-term Neutral rating on the stock. Moreover, Macy’s, which competes with Dillard’s Inc. (DDS), holds a Zacks #3 Rank, which translates into a short-term Hold recommendation, and correlates with our long-term view.
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