Macy's Runs into Losses

The festive season has not brought gifts for Macy’s this time around. Federated stores Inc. reported that the profits dipped by $3 million in the third quarter, though the sales increased by nearly 6%.

Macy’s owners who now also have control of David’s Bridal and Bloomingdale’s said that sales had risen to $5.8 billion on the third quarter ending on 28th October. The figures for the previous year stood at $5.5 billion.

However, despite the increase in sales it recorded a loss of over $3 million or one cent a share. This in comparison to last year’s profit of $436 million (90 cents a share) certainly looks a poor performance. Previous years profits were mainly on sales of credit cards receivables to Citigroup, integration costs and settlement costs accounting to about $49 million.

The story however, is not so straight forward. The loss can be attributed to the acquisition of the May Stores which is a part of the expansion and diversification plans. Over 400 stores are expected to bear the Macy’s name plate. The quarter included store-conversion costs of $145 million, or $90 million after taxes. Excluding the cost of acquisition and inventories changes, the company posted profit of 20 cents a share. Sales in existing Macy's stores, performed better than expected as for the fourth quarter, it expects sales of $9.1 billion to $9.4 billion.

Sales were close to targets in most categories, the company said in a conference call Wednesday--with the exception of home products, "which were off by a lot."

"While we would have liked to have seen more progress in the performance of our former May stores, we did see a lot of progress and reason to be confident about the future," Hoguet, Federated's chief financial officer said.

“Our third-quarter earnings performance was at the high end of our expectations," said Terry J. Lundgren, Federated chairman, president and chief executive officer. He further went on to add that this was a transition year for the firm.

Federated share dipped by 47 cents to close at $39.87 at the New York Stock Exhange.

The average cost at Federated is at $27, which is a bit higher than that at former May Stores.