Macy’s Inc. (M), one of the leading department store retailers in the United States, recently posted second-quarter 2011 results that beat the Zacks’ expectations on the heels of healthy sales, improved operating margin and effective cost management, thereby sending shares up $0.36 or 1.4% to $25.80 in pre-market trading. Consequently, the company raised its full year outlook.
The quarterly earnings of 55 cents a share outperformed the Zacks Consensus Estimate of 47 cents, and jumped 57.1% from 35 cents earned in the prior-year quarter.
Macy’s now guided fiscal 2011 earnings in the range of $2.60 to $2.65 per share, up from $2.40 to $2.45 forecasted earlier, and also lies ahead of the current Zacks Consensus Estimate of $2.54. Following an improved outlook, a positive sentiment may be palpable among the analysts, and we could witness a rise in the Zacks Consensus Estimates in the coming days.
The company has been taking prudent steps to increase sales, profitability and cash flows, which include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy’s continues to focus on price optimization, inventory management and merchandise planning.
The Cincinnati, Ohio-based Macy’s said that total sales grew 7.3% to $5,939 million in the quarter from $5,537 million delivered in the prior-year period. Total revenue also came well ahead of the Zacks Consensus Estimate of $5,881 million. Comparable-store sales for the quarter climbed 6.4% and fared better than the company’s projection of 6%.
Management now expects comparable-store sales growth between 4.8% and 5.1% for fiscal 2011, up from 4.8% previously projected.
Online sales, which include macys.com and bloomingdales.com, sustained their growth momentum, and were up 40.2% in the quarter, favorably impacting comparable-store sales by 1.2%. Macy’s, the operator of about 850 department stores, seeks to expand both the Macy's and Bloomingdale's brands.
Despite a 7.6% increase in cost of sales, gross profit in the quarter climbed 6.8% to $2,482 million, aided by top-line growth. However, Macy’s notified that gross profit margin contracted 10 basis points to 41.8%. Operating income increased 36.8% to $506 million, whereas operating margin expanded 180 basis points to 8.5%.
Macy’s ended the quarter with cash and cash equivalents of $1,495 million, long-term debt of $6,162 million, reflecting a debt-to-capitalization ratio of 50.8% and shareholders’ equity of $5,963 million. During first-half of 2011, the company repaid debt of $337 million and paid dividend of $64 million.
Currently, we have a long-term Neutral rating on the stock.
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