UPDATE 2-Macy's sticks to forecast despite slow Valentine's Day sales

Tue Feb 25, 2014 10:38am EST

By Phil Wahba
    Feb 25 (Reuters) - Macy's Inc's sales this year were weak until
Valentine's Day, the department store operator said on Tuesday, but it stuck to
its full-year forecast because it expects business to return to normal when the
weather improves. 
    Shares of Macy's were up 3.1 percent at $54.81 in morning trading after the
company reported a higher-than-expected profit for the holiday quarter.
    Macy's, which also owns the high-end Bloomingdale's chain, blamed a decline
in January sales in part on the snowy and cold weather in much of the United
States that forced 244 of its stores to close temporarily during the month.
    Chief Executive Officer Terry Lundgren said in a press lease that he
expected customers to return to their usual shopping patterns once the weather
gets warmer and spring merchandise arrives in stores.
    While February is a small month for retailers in terms of sales, Valentine's
Day is an occasion for jewelry and apparel shopping and can be a gauge of
consumers' willingness to spend on nonessentials.
    Macy's reiterated its forecast for a profit of $4.40 to $4.50 per share and
comparable sales growth of 2.5 percent to 3 percent in the fiscal year that
started this month.
    The company said comparable sales, including e-commerce and sales at stores
open at least a year, rose a less-than-expected 1.4 percent in the fourth
quarter ended Feb. 1 as the drop in January dragged down what had been a strong
holiday period.
    Net income rose to $811 million, or $2.16 a share, from $730 million, or
$1.83 per share, a year earlier. Excluding items such as charges for store
closings, earnings were $2.31 a share, 14 cents more than Wall Street expected,
according to Thomson Reuters I/B/E/S. 
      
    Unlike many of its peers, Macy's managed to preserve its gross margin during
a competitive holiday season, when many retailers gave deeper-than-expected
discounts.
    Macy's gross profit margin remained at 40.6 percent of sales. On Monday,
Dillard's Inc said its margin had fallen 1.8 percentage points to 32.8
percent of sales.
    The company, which has been investing heavily to beef up its e-commerce
capabilities and remodeling many stores, including its Manhattan flagship, said
it would spend about $1 billion on capital projects this year.
    Stifel Nicolaus analyst Richard Jaffe said Macy's was "in a better position
than most to gain market share." 
    J.C. Penney Co Inc and Kohl's Corp, which earlier in
February reported disappointing quarterly sales, will report full results later
this week.
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