Macy's delivers strong second quarter earnings

14 Aug '08

6 min read

Macy's Inc reported earnings of 17 cents per diluted share for the second quarter of 2008, ended Aug. 2, 2008, compared with diluted earnings per share of 16 cents for the same 13-week period last year. Same-store sales in the second quarter declined by 2.1 percent.

Second quarter 2008 earnings include two unusual items (described below) that negatively impacted earnings by 12 cents per diluted share. Excluding these items, the company earned 29 cents per diluted share from continuing operations in the second quarter of 2008.

The first unusual item relates to the consolidation of three Macy's divisions announced in February 2008, which is expected to save approximately $100 million per year beginning in 2009 (approximately $60 million in savings for the partial year in 2008). In the second quarter of 2008, the company booked consolidation costs of $26 million ($17 million after tax or 4 cents per diluted share).

Second quarter 2008 results also include non-cash asset impairment charges of $50 million ($31 million after tax or 8 cents per diluted share) related to private brand tradenames acquired in the merger with The May Department Stores Company in 2005. In the second quarter of 2007, Macy's, Inc. earned 29 cents per diluted share, excluding May Company merger integration costs of $97 million ($60 million after tax or 13 cents per diluted share).

Terry J. Lundgren, Macy's Inc chairman, president and chief executive officer, said, "Our organization rose to the challenge and delivered strong second quarter earnings and cash flow, despite the poor economic environment. While we are never fully satisfied when sales are down, we continued to outperform most of our major competitors in same-store sales and to gain market share with a combination of differentiated merchandise, current fashions and great value. This will continue to be our emphasis as we enter the fall season.

We are looking forward to launching our exclusive Tommy Hilfiger product in September, followed by the addition of exclusive FAO Schwarz toy shops in up to 275 Macy's stores this fall. Throughout the third quarter, we have a number of activities surrounding the celebration of the extraordinary milestone of Macy's 150th birthday.

The fourth quarter will follow with a fresh approach to holiday marketing that we believe will be compelling to our customers. Our initial implementation of the My Macy's localization initiative is on track, and we look forward to seeing a positive impact on sales beginning in spring 2009."

For the first half of 2008, Macy's, Inc. reported diluted earnings per share from continuing operations of 3 cents per share, compared with 27 cents per share in the first half of 2007. Excluding division consolidation costs of $113 million ($72 million after tax or 17 cents per diluted share) and asset impairment charges of $50 million ($31 million after tax or 8 cents per diluted share), diluted earnings per share from continuing operations were 28 cents in the first half of 2008. In the first half of 2007, diluted earnings per share were 45 cents, excluding merger integration costs of $133 million ($83 million after tax or 18 cents per diluted share).

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