Macy’s Inc. saw a stronger-than-expected 2014 third quarter. In a testament to cutting expenses during a disappointing sales season, the company reported net earnings grew 22.6% to $217 million, or $0.61 per share, from $177 million, or $0.47, the same quarter one year ago. According to analysts surveyed by Zacks Investment Research, the average estimate for earnings was $0.49 per share.
Total sales in the third quarter of 2014 were $6.195 billion, down 1.3% from total sales of $6.276 billion in the third quarter of 2013. Comparable sales together with comparable sales of departments licensed to third parties were down 0.7%, while third quarter comparable sales exclusive of licensed businesses decreased 1.4%.
However, Macy’s reduced its SG&A expenses to about $2 billion, compared with $2.1 billion the previous year.
Still, Macy’s revised its guidance for 2014, noting that earnings per diluted share for the full year are expected to fall in the range of $4.25 to $4.35, instead of the initial estimate of $4.40 to $4.50. Macy’s also downgraded its forecast for sales growth excluding newly opened or closed stores for the full year from 1.5% to 2 percent growth to 0.7% to 1 percent growth.
Terry J. Lundgren, chairman and chief executive officer of Macy’s, Inc., said, “We are very pleased with our third quarter earnings, even though the sales performance fell short of our expectations. On a two-year basis, our third quarter sales trend was essentially unchanged from the first half of 2014. We knew we were up against very strong third quarter sales growth for our company last year, and thus we had anticipated that our year-over-year comparison would be lower in the third quarter than in the fourth quarter.”
Lundgren added, “Even so, sales did not live up to our expectations in the quarter. However, we were able to maintain gross margin flat to last year and reduced SG&A expense, even excluding the timing benefit of some items, including the sale of certain assets. All in all, it was a solid quarter for earnings.”
As for the remainder of the year, Lundgren said the company is optimistic for the fourth quarter, thanks in part to several factors, including its diverse holiday merchandise, refreshed post-holiday and resort assortments, and Macy’s robust omnichannel initiatives. With “Buy Online Pickup in Store” now rolled out to all full-line Macy’s and Bloomingdale’s locations, same day delivery pilots running in eight Macy’s markets and four Bloomingdale’s markets, and improved functionality and usability in upgraded mobile apps, Lundgren said there is a strong opportunity to continue to grow business and make Macy’s and Bloomingdale’s a shopping destination.
Macy’s stock dipped following the release of its third quarter results on Wednesday, but then quickly recovered. In fact, on Wednesday Macy’s had its biggest gain since Feb. 25, with shares climbing 5.1% to $61.57 at the close of trading.