January 8, 2014 / 9:42 PM / 6 years ago

Macy's posts strong holiday season sales, gives upbeat 2014 outlook

Shoppers ride the escalator at Macy's Herald Square in New York in this November 28, 2013 file photo. U.S. consumers shopped less on the final weekend before Christmas despite deeper discounts, the latest sign of how difficult a season this is turning out to be for retailers. Picture taken November 28, 2013. REUTERS/Eric Thayer

(Reuters) - Department store operator Macy’s Inc (M.N) on Wednesday reported strong holiday season sales and gave a preliminary forecast for 2014 that suggests it would continue to outpace its rivals.

The retailer also announced plans to cut about 2,500 jobs, or 1.4 percent of its U.S. workforce, but said it expects to add positions for its growing online business, leaving overall staffing levels unchanged at around 175,000. Its shares rose 5 percent after the bell.

Macy’s said comparable sales, which include online sales and sales at stores open at least a year, rose 3.6 percent in November and December, roughly the same pace as in the third quarter, when it easily outperformed rivals from Kohl’s Corp (KSS.N) and J.C. Penney Co Inc (JCP.N) to Target Corp (TGT.N) and Wal-Mart Stores Inc (WMT.N) in terms of sales growth. Data firm ShopperTrak on Wednesday said holiday season sales at stores rose 2.7 percent across the industry.

Macy’s, which also operates the high-end Bloomingdale’s chain, forecast a profit of $4.40 to $4.50 per share for next fiscal year, while analysts were only expecting $3.87, according to Thomson Reuters I/B/E/S/. Macy’s expects comparable sales to grow 2.5 percent to 3 percent next fiscal year, which starts in February.

The job cuts were part of a new cost-cutting plan that is expected to save the retailer about $100 million annually. That would include combining some store districts and some jobs at its central office.

Macy’s expects to incur charges of between $120 million and $135 million this quarter for the cost-cutting plan.

In addition to benefitting from brisk luxury sales that lifted business at Bloomingdale’s, Macy’s has been able to gain an advantage over rivals Penney and Kohl’s by using hundreds of its stores to help it fill online orders. It was also more aggressive in wooing shoppers on a more modest budget during the holiday season, helping it compete in the most discount-driven season since the recession.

Going into the fall and holiday season, Macy’s increased its selection of lower-priced items and boosted advertising and in-store signage during sales events to tout its least-expensive merchandise. Macy’s, which caters to a middle-class clientele, offers a broad range merchandise, from $10 cotton T-shirts to Louis Vuitton handbags.

Reporting by Phil Wahba; Additional Reporting by Maria Ajit Thomas in Bangalore; Editing by Lisa Shumaker

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