Profits plummet at May
February 10, 2005-- Home Textiles Today,
ST. LOUIS -- Hurt by a punishing trifecta of weakening same-store sales, eroding margins and higher costs, and further nicked by store closing costs, fourth quarter profits at May Department Stores Co. tumbled 20.2 percent, falling to $626 million from $752 million last year.
Helped by the earlier acquisition of the Marshall Field's department store chain from Target Corp., overall sales advanced at a double-digit pace, rising 12.1 percent, to $5 billion from $4.5 billion last year. But the crucial gauge of same-store sales fell 5.2 percent.All of the damage to the bottom line was done by the core May Department Stores business, and the retailer said the new Marshall Field's business performed well, contributing 5 cents a share to total company earnings of $1.10 per share, even after start-up and integration costs tied to the acquisition.Costs climbed 200 basis points, or 2 percentage points, "largely driven by decreased sales leverage resulting in a 1.2 percent increase in costs such as payroll and finance," the company said. Almost half of the increase in costs stemmed from the expense structure at Marshall Field’s and start-up integration costs, the retailer added.Taking another bite out of profits, interest expense increased 37.5 percent, due largely to the Marshall Field's acquisition, to $110 million from $80 million a year ago.