By  on February 1, 1994

NEW YORK -- R.H. Macy & Co. said Monday aggressive expense reductions helped boost net income 37.5 percent in December.

Macy's, which has been operating in Chapter 11 since Jan. 27, 1992, said it earned $203.3 million in the five weeks ended Jan. 1, compared with $147.7 million in the same period last year.

With the December showing, Macy's has made its monthly business plan all but once in 1993, missing only in July.

"We are encouraged by the fact that Macy's is continuing to perform in accordance with its business plan, and we continue to have confidence in the future," said Robert Miller of Berlack, Israels & Liberman, counsel to Macy's bondholders' committee. Macy's attributed the increased profitability to improved merchandising and gross margins, as well as continued cost cutting. The chain said selling, general and administrative expenses and the cost of goods fell a combined $80 million in December, or more than 2 percentage points apiece.

While Macy's cost cutting has quieted most of its critics, analysts are still waiting for Macy's to turn the corner on sales.

Myron Ullman, Macy's chairman and chief executive officer, said in a telephone interview Monday that sales growth is part of the business plan, and Macy's is taking steps to improve long-term growth.

"We hang our hat on the fact that we've had market share growth in every market we're in versus the competition," said Ullman. Ullman noted that sales should be ultimately helped by the company's move into moderate sportswear, its store remodelings and the opening of new stores. Long-term growth, he said, will be helped by TV Macy's.

"TV Macy's is clearly our vision of how to take the franchise foward over the next 10 years," Ullman said.

As reported, Macy's December sales slipped to $1.17 billion from $1.19 billion a year earlier. Comparable-store sales, however, were up 1.7 percent, adjusted for the discontinuance of Macy's electronics business.

"They've effectively streamlined operations, but people will start to get really excited when real revenue growth and comparable-store growth start to come around," said Todd Slater, an analyst with UBS Securities.Peter Schaeffer, an analyst with the Johnson Redbook Service, noted: "We need to see comparable-store sales growth from Macy's to show they're truly on the road to recovery."

Schaeffer said he expects the sales picture to brighten considerably when Roger N. Farah comes aboard in July as Macy's president and chief operating officer.

"The addition of a chief merchant will certainly help increase sales," he said.

As reported, Macy's operating cash flow in December grew 29.7 percent, to $266.1 million from $205.1 million. Macy's said it ended the month with $279 million in cash, about $40 million ahead of plan, and had $475 million available under its bank line for total available cash of $753 million. -- Fairchild News Service

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