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Macy's shrugs off second quarter hit as a "speed bump," but lowers guidance

Cincinnati - Unusual circumstances dogged Macy's during the second quarter, when the company experienced lower-than-expected sales results due to slacker consumer spending and a cooler spring season.

But the company is viewing the poor performance as temporary and has implemented several strategies - including expanded marketing efforts - to improve its results in the second half of 2013.

"Our management team is seeing the second quarter as a speed bump," said Karen Hoguet, cfo, during the company's earnings call this morning.

Sales in the quarter, ended August 3, were slipped 0.8% to $6.066 billion and comps were also down 0.8%.

Net income inched up 0.7% to $281 million, and earnings grew 7.5% to 72 cents per share.

Average unit retails were flat in quarter, with transactions down 1.6% and units per transactions just short of 1% Hoguet called the drop in the number of transactions "a very different picture of what we experienced earlier this year. More concerning, which is why we've added to our marketing for the back half of the year."

Year to date, sales rose 1.6% to $12.45 billion. Comps increased 1.5% and include online sales at macys.com and bloomingdales.com.

Net income climbed 8.3% to $498 million, or $1.27 per share.

Hoguet said Macy's Inc. largely blames macro-economic issues across the nation for its struggles during the second quarter. The shift in a major promotional Friends and Family sales event also impacted the quarter.

"Our performance in the period, in part, reflects consumers' continuing uncertainty about spending on discretionary items in the current economic environment," noted Terry J. Lundgren, chairman, president and ceo. "After a cool spring, we have taken appropriate markdowns and customers are responding favorably."

Macy's stepped up the pace of early the back-to-school inventory to address areas of the country where the school year is already getting underway, he said.

"As a result, we are capturing incremental sales opportunities in childrenswear, activewear and Impulse apparel - for the older Millennial customer," he added.

The company has lowered its guidance. It now expects comparable sales in the second half of 2013 to increase in the range of 2.5% to 4%, with a full-year comparable sales increase of 2% to 2.9% compared to previous guidance for a 3.5% increase. Earnings for fiscal 2013 are now expected in the range of $3.80 to $3.90 per share, compared to previous guidance of $3.90 to $3.95.

 

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