Shares of Macy’s Inc. rose 4.5 percent, to $61.23, in morning trading after it reported stronger-than-expected third-quarter earnings tempered by a weak sales trend and lower guidance for holiday.
Despite a drop in comparable sales, Macy’s lifted its net earnings 22.6 percent to $217 million in the third quarter ended Nov. 1, from $177 million in the year-ago quarter.
Third-quarter earnings per diluted shares rose by 30 percent to 61 cents, compared with 47 cents in last year’s third quarter.
Third-quarter comparable sales, excluding licensed departments, were down 1.4 percent in 2014 compared with 2013. Comparable sales, including departments licensed to third parties, were down 0.7 percent.
Total sales in the third quarter of 2014 were $6.2 billion, down 1.3 percent from $6.3 billion in the third quarter of 2013.
Macy’s revised its 2014 guidance downward, stating that earnings per diluted share for the full-year 2014 now are expected in the range of $4.25 to $4.35, compared with previous guidance of $4.40 to $4.50. Macy’s sees full-year comparable sales, including licensed departments, increasing by 1.2 percent to 1.5 percent, compared to previous guidance of 2 percent to 2.5 percent.
Fourth quarter comparable sales, including licensed departments, are expected to grow 2 percent to 3 percent.
“We are very pleased with our third-quarter earnings, even though the sales performance fell short of our expectations,” said Terry Lundgren, Macy’s chairman and chief executive officer. “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. 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.”
Lundgren added he was optimistic for the fourth quarter based on the holiday merchandise, particularly its exclusive offerings and values and improved transitioning to fresh goods. He also cited omnichannel and marketing strategies such as buy online, pickup in stores, mobile apps, and the outlook for better weather than last year.
Shares rose as much as 7.7 percent, to $61.80, following disclosure of the results. Their 52-week high of $63.10 was set Aug. 27 and the corresponding low of $49.19 last Nov. 13.