Macy's

Macy’s Inc., topping analysts estimates and indicating some progress with new merchandising programs, reported that its net income for the second quarter rose to $113 million compared to $3 million in the year ago period, though sales on a total and comparable-store basis were significantly down.

Sales in the period totaled $5.55 billion, declining 5.4 percent from sales of $5.87 billion in the second quarter of 2016. The year-over-year decline in total sales reflects, in part, store closings, Macy’s said.

Comparable sales were down 2.5 percent in the second quarter ended July 29.

Earnings per diluted share were 38 cents, or 48 cents  excluding non-cash retirement plan settlement charges and net premiums and fees associated with debt repurchases. Wall Street expected 46 cents.

The earnings per share compares with 3 cents per share in the second quarter of 2016, or 54 cents excluding asset impairment and other charges primarily related to store closings and non-cash settlements.

The company also reaffirmed its sales and earnings guidance for full-year 2017.

“Macy’s, Inc.’s results for the second quarter were in line with our expectations, and we are on track to meet 2017 sales and earnings guidance,” said Jeff Gennette, Macy’s president and chief executive officer. “We saw a notable contribution from the full execution of our new women’s shoe and jewelry models and the continued successful testing of Backstage in store. We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year.

“We are working with a mindset of continuous improvement and will adapt our business in order to reach our goal of stabilizing the brick-and-mortar business while investing for accelerated growth in digital and mobile. Key to this strategy is engaging our customers with an improved experience that includes more elevated and exclusive assortments, a better integration of technology both online and in the store, and additional enhancements intended to drive traffic and sales. There is still work ahead of us, however, I’m encouraged by the progress we’re making on overall performance.”

Year to date, Macy’s sales totaled $10.89 billion, down 6.4 percent from total sales of $11.64 billion in the first half of 2016. Comparable sales were down 3.6 percent.

Macy’s operating income totaled $254 million or 4.6 percent of sales for the second quarter of 2017 compared to $117 million, or 2 percent of sales for the second quarter of 2016. Excluding non-cash settlement charges of $51 million, operating income for the second quarter of 2017 totaled $305 million or 5.5 percent of sales. Excluding asset impairment and other charges primarily related to store closings of $249 million and non-cash settlement charges of $6 million, operating income for the second quarter of 2016 totaled $372 million or 6.4 percent of sales.

Operating income included $43 million in book gains related to the sales of real estate compared to $21 million in the second quarter of 2016.

In the second quarter, the company opened 16 freestanding Bluemercury beauty stores and 12 Macy’s Backstage off-price stores within existing Macy’s stores. The company closed two Macy’s stores – in Temple, Tex., and Dublin, Ohio. Subsequent to the end of the second quarter, the company announced that it will close the Macy’s store at Magic Valley Mall in Twin Falls, Idaho, in early 2018.

Macy’s expects comparable sales to decline between 2 and 3 percent for the year. Total sales are expected to be down between 3.2 percent and 4.3 percent in fiscal 2017. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis. Adjusted earnings per diluted share of between $3.37 and $3.62 are expected in 2017, excluding the impact of the anticipated settlement charges and net premiums and fees associated with debt repurchases. Excluding the impact of the anticipated fourth-quarter gain on the sale of the Union Square Men’s building in San Francisco and the anticipated settlement charges and net premiums and fees associated with debt repurchases, adjusted earnings per diluted share of $2.90 to $3.15 are expected in 2017.

The $25.78 billion retailer has approximately 140,000 employees and operates more than 700 department stores and approximately 150 specialty stores that include Bloomingdale’s The Outlet, Bluemercury and Macy’s Backstage.

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