Macy’s Parent Reports Loss on Costs of May Acquisition

Macy’s parent Federated Department Stores Inc. on Wednesday reported a fiscal firstquarter loss on costs from its acquisition of May Department Stores. The retailer remained conservative in its view for the remainder of its fiscal year, sending its shares lower.

Cincinnati-based Federated, also parent of the Bloomingdale’s chain, stuck by an earnings outlook that is below analysts’ average estimate for the fiscal year ending in January. The company has said, however, that forecasting for this year is tricky because of the uncertainties of absorbing May’s business.

“We expect shares to come under pressure, given the stock’s recent run ... and expectations for an outsized earnings beat,” Goldman Sachs analyst Adrianne Shapira said in a note.

Federated shares closed down 97 cents, or 1.2%, at $77.98 after earlier falling as much as 3%.

The company reported a loss of $52 million, or 19 cents a share, for the quarter ended April 29, compared with a year-earlier profit of $123 million, or 71 cents.

Excluding merger integration costs, inventory valuation adjustments and discontinued operations, Federated earned 2 cents a share. Analysts on average had expected 3 cents, according to Reuters Estimates.

Federated had forecast a first-quarter loss of 5 cents to 15 cents a share, excluding merger integration costs and inventory valuation adjustments.

The retailer completed its $11-billion acquisition of May in August and is now absorbing the deal, running clearance sales, closing some Robinsons-May stores and converting others to the Macy’s nameplate.

“The May company integration is right on track,” said Karen Hoguet, Federated’s chief financial officer, during a conference call with analysts. “But while we all feel good, we also realize that we still have some major integration work ahead of us.”

In the first quarter, Federated recorded $123 million in costs to integrate and consolidate May’s operations, which included closing stores, and $6 million for inventory valuation adjustments.

Stronger-than-expected sales at Macy’s and Bloomingdale’s stores open at least a year drove the quarter’s results, Federated said. These so-called same-store sales are considered a key gauge of a retailer’s performance.

Federated said first-quarter same-store sales were flat overall, compared with its forecast that they would fall 0.5% to 1.5%.

Hoguet said May stores performed at the low end of expectations but the company was pleased with Federated store sales trends.

“The trends that we’re seeing are more casual and warm weather-based, supporting a good second quarter if the weather cooperates,” she said.

Federated said quarterly revenue rose 63% to $5.93 billion.

Federated said it expected earnings, excluding merger integration and inventory valuation costs and a gain on the sale of credit receivables, of 45 cents to 55 cents a share in the second quarter, compared with analysts’ estimates of 60 cents.

For the full year, the company forecast profit of $3.50 to $3.75 a share, short of analysts’ average projection of $4.07.