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NEW YORK — Macy's Inc. reports earnings for the first quarter on Wednesday before the market opens. The following is a summary of key developments and analyst opinion related to the department store chain during the period.
OVERVIEW: Department stores are facing big challenges as shoppers — worried about their shrinking retirement funds and job security — cut back and focus on basics like food. While there are signs of stabilization in consumer spending among some glimmers of hope for the economy, business remains weak.
Last week, Macy's reported that its same-stores sales, or sales at stores open at least a year, fell 9.1 percent in April from April 2008, steeper than the 7.5 percent that analysts expected. Same-stores sales are considered a key indicator of a retailer's health.
The Cincinnati-based chain announced in February that it will eliminate 7,000 jobs, almost 4 percent of its work force, and cut capital spending, reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash. Macy's also announced the national rollout of a plan to localize merchandising to specific markets, which it began in some regions last year.
The moves follow Macy's announcement in January — on the heels of the worst holiday season in decades — that it would close 11 stores, affecting 960 employees.
BY THE NUMBERS: Macy's offered a first-quarter earnings outlook Thursday that was above analysts' expectations, and it reaffirmed guidance for the year due to inventory control and expense cutting. The company expects a loss of 19 cents to 21 cents for the quarter; analysts surveyed by Thomson Reuters, who had projected a loss of 27 cents, now expect a loss of 23 cents.
For fiscal 2009, Macy's is sticking with earnings guidance of 40 cents to 55 cents per share but said it expects to exceed the yearly guidance if the economy improves in the second half of the year. Analysts surveyed by Thomson Reuters predict a full-year profit of 62 cents per share.
ANALYST TAKE: Liz Dunn, a retail analyst at Thomas Weisel Partners LLC, wrote in a report published Thursday that she believes that Macy's earnings-per-share projections for the full year are "conservative" and revised her full-year forecast to 55 cents from 50 cents.
"We believe that Macy's is navigating well in a difficult environment. We continue to believe operating margins can recover to 7.5 percent by 2011," Dunn wrote.
WHAT'S AHEAD: Analysts will be looking for signs of stabilization of Macy's business and will want to know which merchandise categories are improving. They also will seek details on inventory planning for the second half of the year.
STOCK PERFORMANCE: Macy's shares have risen 59 percent during the quarter but remain 46 percent below where they were a year ago. The shares closed at $12.38 on Friday. Over the past 52 weeks, they have traded in the range of $5.07 to $26.10.
