May Stores Reports Record Earnings for 2nd Quarter
May Department Stores Co., which has been quietly building momentum with an ambitious acquisition program, reported record second-quarter earnings Monday.
May, the nation’s seventh-largest retailer, said its second-quarter earnings rose to $130 million, or 49 cents per fully diluted share, from $117 million, or 44 cents a share, a year ago.
The St. Louis-based chain--which operates Robinsons-May, Lord & Taylor, Foley’s and Hecht’s stores--is on its way to reporting a 20th consecutive year of higher earnings, industry analysts said.
“It never seems to get the respect it deserves,” said Peter Siris of UBS Securities. “I actually think May is going to sneak up and surprise people.”
May’s second-quarter net sales rose to $2.62 billion from $2.46 billion for the period last year.
Although the latest results were on target with Wall Street expectations, the stock slipped 12.5 cents to close at $38.50 on the New York Stock Exchange on Monday.
Some analysts attributed the decline to disappointment that May did not exceed expectations.
The company has been gobbling up small regional store operators in one of the industry’s most aggressive acquisition programs, one that is expected to give May healthy market share gains, analysts say.
“We believe the company is becoming increasingly acquisition-minded,” said Bob Buchanan at NatWest Securities. It’s “on a roll, and it’s going to do a lot more in the acquisitions area.”
So far this year, May has acquired 22 stores from struggling regional department store operators. It plans to remodel and reopen 19 of them, four this year.
In July, its Payless ShoeSource division announced the purchase of the 679-store Kobacker Co. shoe chain based in Columbus, Ohio; May plans to remodel and reopen 600 of those as Payless ShoeSource stores.
As for expansion, May has opened 15 new department stores this year and said it plans to open 110 more over the next five years.
In addition, the company is widely expected to be among the retailers interested in acquiring stores that Federated Department Stores and R.H. Macy & Co. may shed to resolve antitrust objections to their planned merger.
May, a stodgy but efficient retailer that keeps its plans under wraps, will not discuss whether any deals are in the works.
“We’re always looking for acquisitions that meet our criteria and that match our strategic plan,” a May spokeswoman said.
This year’s acquisitions, which are not expected to dilute earnings, came after a quiet period during which the company streamlined operations to cut costs. The number of department store divisions was cut to eight from 14 between 1991 and 1993. (Payless ShoeSource is the company’s ninth division.)
