Macy's reports higher profit, Sandy weighs on forecast
(Reuters) - Macy's Inc (M.N) on Wednesday forecast profit for the key fourth quarter that missed Wall Street projections as the department store operator said Superstorm Sandy was pinching many of its shoppers.
That forecast for the quarter, which includes the Christmas shopping season, came as the company reported a much higher quarterly profit than expected, helped by big e-commerce sales gains.
Nearly a quarter of Macy's 840 stores suffered a disruption last week when Sandy, which has so far killed 120 people, hit the highly populated U.S. Northeast and Mid-Atlantic regions.
The effects of the storm, which left millions without power, compounded with uncertainty over whether U.S. tax cuts will be renewed in January and questions about whether shoppers will want bargains this holiday, led Macy's to give a timid profit forecast, Edward Jones analyst Brian Yarbrough said.
"It's just so tough to get a read," Yarbrough said. "There's just a ton of uncertainty heading into the holiday shopping season."
(Graphic on Macy's earnings: link.reuters.com/fyg83t )
Macy's expects fourth-quarter profit, which accounts for about 60 percent of the retailer's annual net income, to come to $1.94 to $1.99 per share. That is below the $2.04 Wall Street analysts were looking for, according to Thomson Reuters I/B/E/S.
When it reported October sales, Macy's said it expected to make up any lost business. But the company sounded a more cautious tone about the impact of Sandy, as many consumers still lack power 10 days after it hit and on Wednesday, New York and New Jersey ordered further evacuations ahead of a new storm.
"Were it not for Hurricane Sandy, we would be even more optimistic about the fourth quarter than what you're hearing today," Chief Financial Officer Karen Hoguet said on a conference call.
For the third quarter to October 27, just before Sandy struck, Macy's reported net income of $145 million, or 36 cents a share. That was up 4.3 percent from $139 million, or 32 cents a share, a year earlier.
The result beat analyst forecasts by 7 cents, according to Thomson Reuters I/B/E/S.
Third-quarter sales rose 3.8 percent to $6.08 billion. Sales at stores open at least a year, a key industry metric known as same-store sales, rose 3.7 percent. Of the gain in same-store sales, online revenues accounted for 2.2 percentage points.
Online sales, which account for about 8 percent of total revenue, rose 40.4 percent last quarter.
Macy's reiterated its forecast last week that same-store sales would rise 4.2 percent for the holiday quarter.
Macy's also announced that as of next year, it would stop reporting monthly sales, joining Kohl's Corp (KSS.N), Saks Inc SKS.N and J.C. Penney Co Inc (JCP.N) among department store chains also deciding this year to abandon the practice.
Macy's dropped monthly reports in 2008 but quickly reinstated them when the financial crisis hit and took a deep toll on consumer spending.
The company has been investing in the opening of distribution centers to fuel its online growth, and technology to make it easier to use mobile devices for shopping inside stores. It is also in the early stages of a $400 million renovation of its Manhattan flagship.
Shares in Macy's were up 0.9 percent at $41.75 in morning trade.
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