Macy’s Delivers Earnings Wrapped in an Analyst-Beating Bow, Shares Hit Record High

Andrew Klips  |

Department store operator Macy’s, Inc. (M) delivered an early Christmas present on Wednesday by saying that profits in the third quarter rose 31 percent compared to last year, easily beating analyst expectations and adding a bit of optimism heading into the holiday season.

Macy’s is the first major retailer to report third-quarter earnings. For the quarter ended November 2, the Cincinnati-based company posted revenue of $6.28 billion, up by 3.3 percent from $6.08 billion in the year prior quarter.  Net income totaled $177 million, or 47 cents per share, versus $145 million, or 36 cents per share, in the third quarter of 2012. It was the 15th straight quarter of improved earnings per share.

Wall Street under-predicted on the top and bottom lines, forecasting earnings of 39 cents per share on revenue of $6.19 billion.

Same-store sales, which measure performance at stores open more than one year and online sales at and, improved 3.5 percent.  Analysts expected 2.1-percent growth. Comparable sales don’t include departments licensed to companies like Finish Line (FINL) .  With those sales factored-in, same-store sales were up by 4.6 percent.

One new store (Bay Shore, NY) was opened during the third quarter.  Macy’s operates about 840 stores under the namesake and Bloomingdale’s brands and 13 Bloomingdale’s Outlet stores.  The company said it plans to hire 83,000 seasonal workers for the holiday shopping season.

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Operating income rose to $360 million, or 5.7 percent of sales, compared with $325 million, or 5.4 percent of sales, last year.

“We were able to achieve a very successful third quarter of 2013, despite the tepid economic climate,” commented Terry J. Lundgren, chairman, CEO and president at Macy’s, in a statement today. “Our business improved during the quarter, with particular strength in October, so we are entering the fourth quarter with confidence,” added Lundgren.

Macy’s repurchased approximately 10.1 million shares of its common stock for an aggregate amount of $447 million in the recent quarter, bringing its fiscal year total so far to about 27.6 million shares for $1.25 billion. At Nov. 2, 2013, the company had remaining authorization to repurchase up to approximately $1.75 billion of its common stock.

Looking ahead, Macy’s reiterated its prior guidance of comparable sales increasing in the range of 2.5 percent to 4 percent in the second half of 2013, and in the range of 2 percent to 2.9 percent for the full-year-2013. Earnings for fiscal 2013 are expected in the range of $3.80 to $3.90 per diluted share. Wall Street was expecting earnings of $3.78 per share.

The upbeat outlook calms some nerves that were rattled in August when Macy’s missed on earnings for the first time in more than six years, saying consumers were spending their money on big-ticket items, such as cars and homes, rather than apparel. With the government shutdown in October and soft consumer spending, analysts were forecasting a grim holiday season for retailers, but Macy’s brightened the room with today’s report.

Shares have jumped ahead more than 9 percent an hour into Wednesday’s trading session to $50.61, representing an all-time high for Macy’s stock. Through Tuesday’s close at $46.33, shares of M were ahead about 21 percent so far in 2013.

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