Traditional department stores have taken more than their fair share of lumps during the economic slowdown thanks to increased competition from discount stores like Wal-Mart (NYSE:WMT) and wholesale clubs like Costco (Nasdaq:COST). However, retail stalwart Macy's (NYSE:M) just reported its first quarter earnings, and for once the news wasn't all doom and gloom. Despite posting losses, the company managed to beat a few analyst estimates, and it its full-year guidance is still hopeful.
By The Numbers
In the period ended May 3, the Ohio-based Macy's reported a hefty $59 million (14 cent per share) loss. That's much worse than the profit of $36 million (11 cents per share) it earned in the comparable period a year ago. Meanwhile, its sales number came in at roughly $5.7 billion, which is a 2.9% decline from the $5.9 billion it booked in the comparable period last year. Its same-store-sales were down 2.6%.
So, now that we've got the bad news out of the way, let's look at something sunny for a change.
The Optimist's Outlook
In conjunction with its quarterly numbers Macy's offered up its outlook going forward. It expects fiscal 2008 same-store-sales to be in the range of down 1% to up 1.5%. The company also it expects to earn between $1.85-2.15 per diluted share (excluding one-time costs).
While it doesn't sound Earth-shattering, this is a very positive sign. The latest numbers are consistent with guidance that the company offered back in February. And with the way things are changing so rapidly in this environment, consistency is a good thing. If nothing else it suggests Macy's is confident that it has a decent merchandise mix that will sell. The timing is good as well. We're still pretty early into the season, so the fact that Macy's is sticking to its guns bodes well (Explore the controversies surrounding companies commenting on their forward-looking expectations, in Can Earnings Guidance Accurately Predict The Future?)
Peer Can't Compare
Macy's quarter was arguably superior to the second-quarter recently posted by rival J.C. Penney (NYSE:JCP). J.C. Penney saw its Q1 same-store numbers decline some 7.4% while Macy's only dropped 2.6%. Once you exclude out special charges, Macy's earned 2 cents per share for the quarter, which was better than the 2-cent per-share loss that had been expected. J.C. Penney also beat expectations, with EPS of 54 cents versus expectations or 50 cents; however, its revenue of $4.13 billion was just shy of the $4.17 billion expectation. Macy's beat expectations for revenue, posting $5.7 billion versus the $5.6 billion the Street expected.
Frankly, I think that the analyst community will find Macy's performance noteworthy, and I also speculate that we could see some favorable research come out about the company in the not too distant future. This could drive the stock. (For further reading, head read Analyst Recommendations: Do Sell Ratings Exist? and Analyst Forecasts Spell Disaster For Some Stocks.)
Bottom Line
Macy's first quarter wasn't perfect but it could have been much worse. It beat the quarter posted by rival J.C. Penney. and also managed to beat several analyst expectations. The company held its ground on 2008 full-year guidance, and this is encouraging.
For further reading, be sure to check out our related article Analyzing Retail Stocks.