UPDATE 2-Macy's sticks to 2014 forecast as sales pick up after hard winter

Wed May 14, 2014 10:03am EDT

* First-quarter earnings $0.60/share vs est $0.59

* Revenue falls 1.7 pct to $6.28 bln vs est $6.46 bln

* Raises dividend and share buyback program

* Shares rise 2 percent in early trading (Adds analysts comments, background, graphic; updates shares)

By Maria Ajit Thomas

May 14 (Reuters) - Department store operator Macy's Inc stuck to its full-year profit forecast as business picked up after a severe winter in the United States that hurt first-quarter sales.

Macy's also raised its dividend and increased its share buyback program, helping to push the company's shares nearly 2 percent in morning trading on the New York Stock Exchange.

"The (weak business trend) improved in April when the weather began to turn in northern climate zones. We see this as a good sign moving forward into the second quarter," Chief Executive Terry Lundgren said in a statement.

Macy's, which also owns the high-end Bloomingdale's chain, reaffirmed its earnings forecast of $4.40-$4.50 per share for the year. Analysts on average expect a profit of $4.48 per share, according to Thomson Reuters I/B/E/S.

The forecast could be conservative as Macy's continues to benefit from selling more brands and investments in e-commerce, said Brian Sozzi, chief executive of Belus Capital Advisors.

The company has also remodeled many stores, including its flagship store at Herald Square in Manhattan and launched initiatives such as "Buy Online Pickup in Store" and "Click and Collect" to boost sales.

"If you got the product right in April when the weather was good and people wanted to come back to the mall, you will probably have a somewhat decent start to the second quarter," Sozzi said.

Macy's namesake stores sell everything from clothing to home goods to a mainly middle-class clientele.

The company raised its dividend to 31.25 cents per share from 25 cents and increased its stock buyback program by $1.5 billion to about $2.5 billion.

"Macy's focus on improving the merchandise assortment while enhancing the customer experience both in stores and online will likely continue to drive strong results," Stifel Nicolaus analyst Richard Jaffe wrote in a note to clients.

Macy's net income rose 3.2 percent to $224 million, or 60 cents per share, in the three months to May 3. Revenue fell 1.7 percent to $6.28 billion.

Analysts on average had expected a profit of 59 cents per share, on revenue of $6.46 billion.

Comparable-store sales fell 1.6 percent. Analysts polled by Consensus Metrix had expected a rise of 1.30 percent.

Macy's shares were up marginally at $58.01 in morning trading. Up to Tuesday's close, the stock had risen 8.3 percent this year. (Reporting by Maria Ajit Thomas in Bangalore; Editing by Kirti Pandey, Ted Kerr and Savio D'Souza)

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