Department stores chain Macy's Inc. (M) on Wednesday posted a narrower loss for the third quarter, reflecting strong sales at Bloomingdale's and "outstanding growth" in its Internet businesses. In addition, the company hiked its full year outlook, but issued a much lower-than-expected earnings guidance for the fourth quarter, sending the shares down by over 5% in pre-market trade.
The New York-based company's third-quarter net loss was $35 million, narrower than the prior-year quarter's loss of $44 million. On a per share basis, loss shrank to $0.08 from $0.10 incurred in the same quarter of last year.
Excluding restructuring costs, the latest quarter's loss was $0.03 per share compared to a loss of $0.08 last year. On average, 14 analysts polled by Thomson Reuters expected the company to post a loss of $0.07 per share. Analysts' estimates typically exclude special items.
In the third quarter of 2009, restructuring charges totaled $33 million related to division consolidations and localization initiatives announced in February 2009 that were designed to reduce costs and make the company more locally responsive to customers. In the year-earlier quarter, restructuring charges related to division consolidations and localization initiatives announced in 2008 were $16 million.
Meanwhile, quarterly net sales declined 3.9% to $5.28 billion from $5.49 billion reported in the comparable quarter of the previous year, with same-store sales decrease of 3.6%. Ten Wall Street analysts had a consensus revenue estimate of $5.25 billion for the quarter.
Terry Lundgren, chairman, president and chief executive officer of Macy's said, "We continue to see encouraging results from our My Macy's approach to local markets. Of our Top 10 districts in same-store sales in the third quarter, seven were among the original My Macy's pilot districts."
Further, the company noted that other bright spots in the third quarter included a strong sales performance at Bloomingdale's and outstanding growth in its Internet businesses, which are being fueled by the ongoing multi-channel integration at both Macy's and Bloomingdale's.
Online sales, combining macys.com and bloomingdales.com, were up 21.1% in the latest quarter and positively affected the company's same-store sales by 0.6 percentage points in the quarter. Online sales are included in the same-store sales calculation for Macy's Inc.
During the recent quarter, Macy's opened four new stores in the Fresno, Visalia, Dallas-Ft. Worth and Kansas City markets and a replacement store in Nampa, ID, as well as re-opened two stores in the Houston market that had been damaged last year by Hurricane Ike. In all, Macy's opened or re-opened eight stores in 2009.
Operating income for the third quarter of fiscal 2009 totaled $55 million or 1.0% of sales, compared to $68 million or 1.2% of sales in the year ago period. Third quarter 2009 operating income included $33 million in restructuring-related costs, while the prior-year operating income included $16 million in restructuring-related costs. Excluding these costs, operating income was $88 million or 1.7% of sales, compared to $84 million or 1.5% of sales in the previous year.
For the nine-month period, the company incurred a net loss of $116 million or $0.27 per share, compared to a loss of $30 million or $0.07 per share in the year-ago period.
Excluding restructuring-related costs, earnings totaled $0.01 per share compared to $0.20 per share earned in the same period of last year.
Net sales for the 39 weeks ended October 31, 2009 were $15.6 billion, down 7.8% from $16.9 billion reported in the corresponding period of the previous year. Year-to-date same-store sales dropped 7.5%.
Looking forward to the fourth quarter, the company expects earnings to be in a range of $1.00 - $1.05 per share, excluding restructuring-related costs, while analysts expect the company to report earnings of $1.17 per share.
Fourth-quarter same-store sales are currently expected to be down 1% - 2%, which calculates to down 2.1% - 2.6% in the second half of 2009, better than the previous guidance for second half same-store sales to be down 5% - 6%.
Based on the fourth-quarter outlook, the company now projects full year 2009 earnings to range between $1.01 and $1.06 per share, excluding restructuring-related costs, versus the prior guidance range of $0.70 and $0.80 per share. Analysts are forecasting earnings of $1.11 per share for the full year.
Full-year same-store sales are now expected to be down between 5.4% and 5.7%, better than the company's original guidance of down 6% to 8% provided at the beginning of the year. The company continues to expect to book a total of about $400 million in pre-tax restructuring-related costs.
Among Macy's' rivals, luxury retailer Saks Inc. (SKS) is scheduled to report its third-quarter results on November 17, with analysts projecting a loss of $0.12 per share on revenues of $623.88 million.
Macy's shares, which have been trading between $5.07 and $20.84 in the past 52 weeks, closed Tuesday's trading session at $19.43. In the pre-market session, the stock is currently trading at $18.45, down 98 cents or 5.04%, on a volume of 1.95 million shares.
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