Macy’s, Target and Sears post big profit gains
Three of the nation’s largest retailers saw earnings rise significantly in the fourth quarter and said Tuesday that they expected continued improvement this year even against a slow industry recovery.
For the quarter ended Jan. 30, department store giant Macy’s Inc. swung to a $466-million profit after losing billions of dollars in the year-earlier period; discounter Target Corp. said net income increased 54%; and Sears Holdings Corp. posted its best quarterly earnings in three years.
“It’s very clear, looking at the economic environment as well as the retailers’ businesses, that the environment is dramatically better from where it was a year ago,” said Bill Dreher, senior retail analyst at Deutsche Bank Securities who follows all three companies. Still, he said sales results weren’t as encouraging as profitability.
Macy’s Chief Executive Terry Lundgren said his firm’s results were driven by success from the company’s new local merchandising strategy, My Macy’s, along with a 26.6% increase in online sales and a rebound at its luxury Bloomingdale’s chain. He added that the Cincinnati company also reduced expenses and improved margins.
“Our company initiated unprecedented change in 2009 as we adopted a unified organization structure and rolled out our My Macy’s localization strategy amid the worst economic environment in decades,” Lundgren said in a statement. “The fourth quarter represented a clear-cut improvement in sales trends from earlier in the year.”
But sales in the fourth quarter still declined 1.1%, to $7.85 billion from $7.93 billion in the year-earlier period. Sales at stores open at least a year -- known as same-store sales and considered an important measure of retail health -- were down 0.8%, though that was better than the company had initially predicted.
Macy’s $466-million profit, or $1.10 a share, compared with a loss of $4.77 billion, or $11.33, a year earlier, a result of a write-down in assets.
The chain, which operates about 800 Macy’s and 40 Bloomingdale’s stores, has been trying to reverse a decades-long decline in the department store business model that has seen consumers migrate to big-box discounters, free-standing stores and the Internet.
During an interview last week with The Times, Lundgren said he still expected “lots of head winds” this year, but said Macy’s was in a good position to grab market share from competitors.
“I believe the industry in general will continue to be challenged,” he said. “But in our case we have a stronghold on the relationship with the customer.”
At Minneapolis-based Target, fourth-quarter profit totaled $936 million, or $1.24 a share, compared with $609 million, or 81 cents, in the year-earlier period. The country’s second-largest discounter said sales increased 3.7%, to $19.7 billion from $19 billion; same-store sales increased 0.6%.
“Fourth-quarter retail segment performance was well above our expectations due to stronger-than-expected holiday sales, combined with well-controlled inventories and disciplined expense controls,” Target CEO Gregg Steinhafel said in a statement. “In 2010, we expect our guest traffic trends and sales of discretionary categories to benefit from broader implementation of our new merchandise initiatives as well as a continued modest recovery in the economy, and believe Target will continue to gain profitable market share.”
The tone was less cheery at Sears, where profit rose but sales slid $33 million to $13.2 billion for the quarter. For the full year, total sales fell $2.8 billion to $44 billion. The decreases were mainly due to lower same-store sales and 62 fewer Kmart and Sears full-line stores, the Hoffman Estates, Ill., company said.
U.S. same-store sales declined 2.5% in the fourth quarter.
“I recognize that our financial results, while substantially improved from 2008, remain well below where we would like them to be,” Chairman Edward S. Lampert said in a letter to shareholders posted on the company’s website. “At the same time, we have seen significant improvements in our focus on customers and the transformation of our culture.”
On Monday, the company said it would close 21 underperforming stores in the spring, none in California.
Shares of Macy’s rose 20 cents, or 1.1%, to $18.67; shares of Target fell 58 cents, or 1.2%, to $50.06; and shares of Sears fell $1.86, or 1.9%, to $93.80 on Tuesday.
