By and  on March 17, 1994

NEW YORK -- Although R.H. Macy & Co. reported healthier figures for its second quarter and for February, many observers were wondering Wednesday whether the chain can sustain the momentum.

The upbeat numbers, reported this week, could give Macy's some ammunition in its battle to thwart Federated Department Stores' takeover bid, but after taking a day to digest the figures, industry observers pointed out:

February may not be the best barometer of a retailer's business.

Cost controls, while boosting the bottom line, may have gone too far and could be depressing service and housekeeping at the stores.

Sales gains are coming primarily from hard goods, and any real turnaround would require stronger apparel sales.

Fidelity Investments, Macy's largest creditor, might back a Macy's reorganization plan to stay independent, but neither party has confirmed an agreement.

While the Christmas quarter was good, it was up against a weak year-ago period.

General Electric Capital Corp. might turn out to be a Macy ally, but it has not yet said so.

The latest Macy figures, released Tuesday, included a 61 percent increase in quarterly earnings and a 5.7 percent comparable-store sales gain in February. The momentum could be continuing. According to a source close to Macy's, sales from the beginning of February through Tuesday are running 12 percent ahead of last year's results and 5 percent ahead of plan.

"February is a funny month to judge a store by," said retail consultant Walter K. Levy. "They may be getting a fast checkout on new merchandise. The real answer is in the March-Easter period."

Said another source, "February is a directional month, but this year not as much because of all the snow days and fall clearances that ran into February."

However, Isaac Lagnado, principal of Tactical Retail Solutions, said "February is important. It's early spring checkouts and directional for spring and Easter. The dress business might come through. Kids should be good for them, too. Macy's has to start the year with strong sell-throughs."

Lagnado said home goods continue to be the strength of the business, but "men's and moderate women's sportswear is beginning to kick in." Fine jewelry is also making bigger contributions.

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