Macy's sees higher profit, eyes market share gain

NEW YORK (Reuters) - Macy's Inc (M.N) increased its full-year sales and profit outlook, saying consumer spending was up and suggested on Tuesday the U.S. department store operator has won market share from its rivals.

"I'm not counting on everyone winning," Chief Executive Terry Lundgren said at an analyst day in New York that was broadcast over the Internet. "It about taking market share from others."

The move by Macy's to raise its profit forecast at first buoyed investors and helped Macy's shares pare losses earlier in the session, but by the close the stock was off nearly 4 percent as news of the downgrade of Greek bonds by ratings agency Standard & Poor's brought down the wider market.

Macy's shares closed 94 cents lower at $23.91 on the New York Stock Exchange, while the S&P 500 market index .SPX was down 2.3 percent and the S&P Retail Index .RLX fell 3.2 percent.

Resurgent consumer spending prompted Macy's to increase its forecast for sales at stores open at least a year -- a retail industry gauge known as same-store sales.

The retailer now expects same-store sales will rise between 3 percent and 3.5 percent this year, up from a previous range of growth of between 1 percent and 2 percent.

Cincinnati-based Macy's raised its profit forecast for fiscal 2010 to between $1.75 and $1.80 per share, up from an earlier forecast of $1.55 to $1.60 per share. The new range compares with analysts' average forecast of $1.37 for 2010, according to Thomson Reuters I/B/E/S.

Macy's will make it a priority to use its free cash to pay down debt with a view to regaining its investment-grade rating, Chief Financial Karen Hoguet said.

Macy's has a Ba2 rating from Moody's Investors Service and a BB from Standard & Poor's, two levels below investment grade in both cases. Hoguet said reaching BBB would be good enough.

The company is also aiming to bring its operating margins back up to levels last seen in 2007, before the economic crisis sent consumer spending into a tailspin.

FIGHT FOR MARKET SHARE IS ON

Hoguet said she was surprised by the strength of the rebound in consumer spending and she suspected Macy's has been winning market share from rivals

Earlier this month, Macy's said its same-store sales had risen 10.8 percent in March, handily beating Wall Street expectations. Those results prompted the department store chain to forecast first-quarter sales would be up 5 percent, an outlook it maintained at its analyst day on Tuesday.

Last week, Macy's rival, JC Penney Co Inc (JCP.N), also enjoying higher sales, said it was aiming to increase its annual sales by 2014 to $23 billion -- a $5 billion gain. Penney's same-store sales were up 5.4 percent in March.

Despite Macy's strong March, it was bested by some of its key rivals to which analysts have said it was losing shoppers. Sales in March at mid-level chain Kohl's Corp (KSS.N) and upscale rival Nordstrom Inc (JWN.N) rose 22.5 percent and 16.8 percent, respectively.

Hoguet said the number of Macy's and Bloomingdale's stores would not change much in the coming years, given how many real estate projects have been canceled during the recent downturn.

The retailer operates 850 stores under its own name, as well as Bloomingdale's in the United States and Puerto Rico.

Top U.S. retailers will report April sales next week, results Hoguet said would give her a better sense of which retailers were winning shoppers from their competitors.

(Reporting by Phil Wahba; editing by Maureen Bavdek and Andre Grenon)