MAY REPORTS FIRST NET INCREASE OF YEAR
Byline: Jennifer Weitzman
NEW YORK — A greater emphasis on updated merchandise helped The May Department Stores Co. post its first improvement in net earnings of the year just in time for its fourth quarter.
A more “merchandise-driven” strategy, including more conventional opening price-point private labeled items, contributed to a net income increase of 1 percent, to $518 million or $1.59 a share in the quarter ended Feb. 3, from $513 million or $1.45 in the year-ago period. The results were in line with Wall Street’s expectations.
Retail sales improved 5.5 percent, to $4.95 billion from $4.69 billion. Comparable-store sales increased 1.8 percent for the quarter.
The St. Louis-based operator of Lord & Taylor, Filene’s and other department stores has been perceived as steadily losing ground on the fashion front to chief rival Federated Department Stores over the past few years. To address that, Gene Kahn, May Co.’s president and chief executive officer, said last February that he wanted to change the firm into a “more merchandise-driven, sales-driven company” with a renewed focus on capturing younger shoppers and the ongoing casualization of America.
May Co.’s private labels include Valerie Stevens and Karen Scott in women’s and Brandini and Clairbrooke in men’s. To date, private label accounts for 17 percent of sales but the company said it hopes to grow to the 20 percent level this year.
“Our intensity, focus and commitment to be more merchandising-driven yielded some good short-term wins and have helped us prepare for 2001 and beyond,” Kahn said in response to a WWD question. “We are currently seeing good results with fashion newness and trends in the private label product we developed for spring and now have in our stores. We expect further progress through the spring and the fall.”
“Our emphasis remains on being a more intensely merchandising-driven company,” Kahn said in a statement. “Newness counts to our customers and we continue to emphasize new trends, new businesses and new merchandising ideas.”
While pleased with May Co.’s results, analysts stressed different aspects of the quarterly performance.
“May pulled it out in the fourth quarter,” A.G. Edwards & Sons’ Bob Buchanan said. He noted that while May Co. was very promotional, it did a good job at controlling the level of inventory.
He said May Co.’s improved fashion content and fabrications, especially in women’s apparel, helped to drive improvements in the quarter. Still, he said, May Co. trails Federated in overall fashion content and private label merchandise.
Noting the first increase in profits for the year, Shari Schwartzman Eberts with J.P. Morgan said management’s realistic planning for the period gave May Co. “a solid quarter in a difficult environment.”
She said women’s apparel, an area in which it was struggling in the past, was one of the strongest categories and that overall inventory remained even with last year’s level.
The company was flush with cash throughout the year. Its $1.4 billion enabled it to make acquisitions, including last month’s deal in which it bought nine Saks Inc. stores for $310 million and its earlier acquisition of David’s Bridal last year. It also opened 23 new departments stores, remodeled or expanded existing stores and repurchased 28.4 million shares for $789 million.
Asked if there were any deals in the works, Kahn said: “We are always evaluating strategies that are good growth vehicles for the company and are good for our shareowners.”
For the year, the company’s profits fell 7.4 percent, to $858 million, or $2.62 a share, from $927 million, or $2.60. Sales improved 5.3 percent, to $14.59 billion from $13.85 billion for the 53-week period. On a 52-week basis, sales improved 4.3 percent, to $14.45 billion. Comparable-store sales were up 0.5 percent.
Although it is too early in the season to make any safe predictions, spring sales have so far been strong and its recent 1 to 2 percent comp-store growth is slightly ahead of its February plan, Eberts said. In addition, she said the department store company should benefit from easy comparisons from last spring, when retailers suffered from lackluster fashions.
Kahn characterized spring sell as “off to a good start, fostered by newness in color, pattern and texture.”