Cincinnati – Federated Department Stores Inc. said Wednesday it swung to first-quarter profit, but adjusted earnings missed Wall Street estimates as sales at newly converted Macy’s stores remained weak.
The company earned $36 million, or 8 cents per share, in the quarter ended May 5, compared with a year-ago loss of $52 million, or 9 cents per share, hurt by a hefty charge.
Excluding costs associated with the company’s integration of May Department Stores Co., which it acquired in 2005, earnings rose to 16 cents per share from 1 cent per share last year. Analysts had forecast a profit of 19 cents per share.
Sales slipped 0.1 percent to $5.92 billion from $5.93 billion last year, missing estimates for $5.99 billion. Last week the company announced sales at stores opened at least a year – considered a key indicator of a retailer’s success – rose by 0.6 percent.
Federated, which also operates the Bloomingdale’s chain, took a charge of $22 million, or 5 cents per share, to cover costs of converting regional department stores gained in the May acquisition to its flagship Macy’s brand.
“Sales in the new Macy’s locations were disappointing in the quarter,” chief executive Terry Lundgren said in a statement.
Chief financial officer Karen Hoguet told analysts in a conference call that while sales weakness in February and March was primarily in the former May stores and the home business – particularly furniture – it was more widespread in April, particularly in apparel.
“It is hard to say how much of the April weakness in apparel was due to weather, but clearly it was a factor,” Hoguet said.
Customers are responding well to new brands at the former May stores, but Federated wants to communicate more effectively with new customers and bring more people into the former May stores to try Macy’s. The company is planning to do more advertising and promotions, she said.
Shares of Federated fell 29 cents to $39.65 Wednesday. Shares have ranged from $32.57 to $46.70 in the past year.
Federated operates more than 850 department stores in 45 states (including Colorado), the District of Columbia, Guam and Puerto Rico under the names of Macy’s and Bloomingdale’s.
