Macy's Inc. said Wednesday its second-quarter profit fell by 77 percent, weighed down by its takeover of a rival, and warned that it would miss Wall Street expectations for the third quarter and the year.
Net income declined to $74 million, or 16 cents per share, from $317 million, or 57 cents per share, a year ago for the quarter ended Aug. 4. Excluding May Department Stores takeover costs of $60 million, or 13 cents per share, the company earned 29 cents per share in the latest period, compared with 33 cents in the 2006 second quarter.
Sales slipped about 2 percent to $5.89 billion from nearly $6 billion last year.
Analysts surveyed by Thomson Financial, who typically exclude one time charges like integration costs, had forecast profits of 26 cents per share on revenue of $5.88 billion. Last month, Macy's cut its third quarter profit outlook to 20 to 30 cents a share from 35 to 45 cents.
Macy's projected that third-quarter earnings, excluding merger costs, will now be 5 to 10 cents per share, with earnings for the full year, without the merger costs, of $2.15 to $2.30 per share. Analysts have projected 19 cents a share for the third quarter and $2.37 per share for the year.
Macy's stock fell below its 52-week low in early trading Wednesday, at $31.49, or down 24 cents. Shares have traded as high as $46.70 in the past year.
"While the second quarter was below our initial expectations, we did see improving sales trends through the quarter in former May Company stores and in home-related merchandise categories," said Terry J. Lundgren, Macy's chairman, president and chief executive. "We are optimistic that our business can and will improve in the second half of the year, despite what appears to be a more challenging economic environment."
Lundgren told shareholders at their annual meeting in May that disappointing sales results were partly due to strategic changes made too quickly at the former May Department Stores. Lundgren orchestrated Macy's $11 billion acquisition of May in 2005.
Macy's changed its name from Federated Department Stores this year after converting most of its former May stores — including popular regional names such as Marshall Field's, Foley's and Filene's — into Macy's in its push to make Macy's a national department store brand.
The turnaround of the former May stores hasn't progressed as well as expected, and the retailer also has been facing challenges such as a weakening home market, which has depressed its home furnishings sales.
For the first half of the year, Macy's sales totaled $11.81 billion, down nearly 1 percent from total sales of $11.93 billion in the first 26 weeks of 2006. For the first half, net income slid to $110 million, or 24 cents a share, from $265 million, 48 cents a share.
Wednesday, August 15, 2007
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