UPDATE 5-Macy's holiday outlook a turkey, stock drops

Wed Nov 11, 2009 4:25pm EST

 * Sees Q4 EPS $1-$1.05, below Street view of $1.17/shr
 * Q3 loss/shr 3 cts ex-items; Wall Street view 7 ct loss
 * Q3 sales fell 3.9 pct to $5.28 bln, online up 21.1 pct
 * Shares end down 8.1 pct
 (Adds analyst comment on share drop, updates share price)
 By Phil Wahba
 NEW YORK, Nov 11 (Reuters) - U.S. department store operator
Macy's Inc (M.N) forecast earnings for the fourth quarter,
which includes the crucial holiday shopping season, far below
Wall Street expectations on Wednesday, sending shares down 8.1
 "The falls in same-store sales were less dramatic than they
could have been, and there are consumers shopping," said Leah
Hartman, an analyst with CRT Capital Group. "Expectations might
have gotten a little ahead of themselves."
 Macy's is the first major U.S. department store chain to
report financial results this week. The others include: JC
Penney Co (JCP.N), Nordstrom Inc (JWN.N) and Kohl's Corp
 On a call to analysts, Chief Financial Officer Karen Hoguet
warned that the economy made forecasts more challenging.
 "There is more uncertainty than usual in the environment,"
she said.
 Macy's forecast same-store sales, or sales at stores open
at least a year, to fall between 1 percent and 2 percent in the
fourth quarter.
 It also said it expects fourth-quarter earnings of $1 to
$1.05 per share. Wall Street analysts had expected earnings of
$1.17 per share, according Thomson Reuters I/B/E/S.
 The company did improve its outlook for full-year
same-store sales, forecasting a decline of 5.4 percent to 5.7
percent, compared to an earlier forecast for a decline of 6
percent to 8 percent.
 Analysts said Macy's efforts to keep inventories lean
resulted in fewer markdowns, better sales and improved gross
margins. Macy's gross margin rose to 40.2 percent from 39.5
percent a year earlier.
 In the third quarter, Macy's net loss narrowed to $35
million, or 8 cents a share, from $44 million, or 10 cents a
share, a year earlier. Excluding one-time items such as $33
million in restructuring costs, its loss was 3 cents a share.
 Last year, the retailer restructured itself under its "My
Macy's" program, designed to help the chain focus on local
tastes and reduce head office expenses and duplications. So far
in 2009, the company has spent $205 million on its
 Macy's said sales fell 3.9 percent to $5.28 billion in the
third quarter.
 Analysts, on average, had been expecting a loss of 7 cents
per share and sales of $5.25 billion, according to Thomson
Reuters I/B/E/S.
 The Cincinnati-based chain said losses had narrowed on the
strength of its Bloomingdale's stores and online sales, which
rose 21.1 percent during the quarter.
 Macy's said last week same-store sales had fallen 0.8
percent in October, a steeper drop than the 0.1 percent
expected by analysts, according to Thomson Reuters.
 The company operates 800 Macy's stores in the United States
and its territories, as well as 40 Bloomingdale's stores.
During the quarter, Macy's opened or re-opened six stores.
 The drop in Macy's shares came on a day that saw other
department stores' shares fall as well. For example, JC Penney
shares were down 2.63 percent to $30.33, and Dillard (DDS.N)
was own 2.5 percent to $13.90 in mid day trade.
 The sharp drop in Macy's shares is not surprising,
considering their dramatic rise so far this year, said Matt
Arnold, an analyst with Edward Jones. They are up 72.6 this
 Macy's shares fell $1.57, or 8.1 percent, to close at
$17.86 on the New York Stock Exchange.
 (Reporting by Phil Wahba; Editing by Derek Caney, Dave
Zimmerman, Leslie Gevirtz)