Macy's quarterly profit falls short; sales outlook cut

New York • Macy's Inc. reported a 4 percent profit increase in its fiscal second quarter as business rebounded from slow sales earlier in the year.

But the department store chain cut its full-year outlook for a key sales measure, saying Wednesday it couldn't make up the sales shortfall from the first quarter, when winter storms kept shoppers at home.

Shares of Macy's tumbled nearly 5 percent, or $2.83, to $56.93 in trading Wednesday.

Macy's, a standout among its peers throughout the economic recovery, is the first of the major retailers to report second-quarter results, which should provide insight into shoppers' mindset heading into the critical final months of the year. Wal-Mart Stores Inc., Nordstrom Inc., Kohl's Inc. and J.C. Penney Co. are set to report their results Thursday.

Like many retailers catering to the middle class, Macy's is facing economic challenges. While the job market is improving and the housing market is rebounding, the gains are not strong enough to sustain big shopping sprees.

Macy's said Wednesday that it's been pleased with the start to the back-to-school season, which typically begins mid-July and ends in mid-September. But Macy's said it needs to continue to discount to bring shoppers in.

"Our outlook for the fall season reflects our confident optimism tempered with the reality that many customers are feeling the impact of an economic environment that, at best, is improving very gradually," Chief Financial Officer Karen Hoguet told investors during a conference call Wednesday.

Still, Macy's, which also operates the upscale chain Bloomingdale's, has benefited from its focus on tailoring merchandise to local markets. It's also aiming to create a more seamless experience for shoppers who are going back and forth from stores to websites.

Macy's, which has corporate offices in Cincinnati and New York, said it just finished rolling out a program that allows shoppers to order online and then pick up items at stores. The company also said that its sharpened marketing and merchandising aimed at 13- to 30-year-old customers has re-energized the back-to-school business.

Macy's said its second-quarter net income increased to $292 million, or 80 cents per share, from $281 million, or 72 cents per share, in the same quarter a year earlier. The average estimate of analysts surveyed by Zacks Investment Research was for profit of 86 cents per share.

The company said revenue rose 3.3 percent to $6.27 billion from $6.07 billion in the same quarter a year earlier, but missed Wall Street forecasts. Analysts expected $6.29 billion, according to Zacks.

Macy's said that sales at stores open at least a year rose 4 percent. The figure includes business from departments licensed to third parties. But Macy's said that it now expects that measure to increase by 2 percent to 2.5 percent for the year, down from its previous projection of 2.5 percent to 3 percent.