Macy's Profit Tops View, But Sales Miss; Backs 2014 Outlook, Boosts Dividend 25%

(RTTNews) - Department store chain Macy's, Inc. (M) reported Wednesday a profit for the first quarter that increased from last year, despite a sales drop, reflecting improved operating margins amid lower expenses.

Earnings per share topped analysts' expectations, while quarterly net sales missed their estimates. The company also reiterated its earnings and comparable sales growth guidance for the full-year 2014.

Further, Macy's also announced a 25 percent increase in its quarterly dividend on common stock and authorized an additional $1.5 billion share repurchase.

"In addition to weather, first quarter comparisons were negatively impacted by a calendar shift for our popular Friends & Family event and the fact that we were up against a very strong first quarter last year," Chairman, President and CEO Terry Lundgren said in a statement.

The Cincinnati, Ohio-based retailer reported net income of $224 million or $0.60 per share for the first quarter, higher than $217 million or $0.55 per share in the prior-year quarter.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.59 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 1.7 percent to $6.28 billion from $6.39 billion in the same quarter last year, and missed eighteen Wall Street analysts' consensus estimate of $6.46 billion.

Comparable sales for the quarter also declined 1.6 percent, and edged down 0.8 percent when combined with comparable sales from departments licensed to third parties.

Operating margin for the quarter improved 30 basis points to 7.1 percent from last year as gross margin expended 10 basis points and selling, general and administrative expenses as a percentage of total sales declined 20 basis points.

Additionally, Macy's board authorized a 25 percent increase in quarterly dividend on common stock to 31.25 cents per share, payable on July 1 to shareholders of record at the close of business on June 13, 2014.

The board also raised the company's share repurchase authorization by $1.5 billion, bringing the remaining authorization outstanding at the end of the first quarter to about $2.5 billion. Since resuming its share repurchase program in August 2011, Macy's had bought back about 93 million shares for about $3.9 billion through the end of the first quarter.

"Overall, business trends were soft in January through March, with the exception of the Valentine's Day shopping period. The trend improved in April when the weather began to turn in northern climate zones. We see this as a good sign moving forward into the second quarter," Lundgren added.

Looking ahead to fiscal 2014, the company reiterates its earnings guidance in a range of $4.40 to $4.50 per share on projected comparable sales growth of 2.5 to 3 percent. Street is currently looking for full-year 2014 earnings of $4.48 per share on annual net sales of $28.67 billion.

M closed Tuesday's regular trading session at $57.84, up $0.36 on a volume of 5.04 million shares. In the past 52-week period, the stock has been trading in a range of $42.18 to $61.26.