Macy’s Earnings Decline; Sales at Former Field’s Stores Disappoint

DETROIT _ Macy’s Inc. reported disappointing earnings Wednesday and noted that sales at the former Marshall Field’s stores continued to lag nearly a year after they became Macy’s stores.

The Cincinnati-based retailer also reduced its profit forecast for the year after reporting second-quarter profits fell 76 percent to $74 million, dragged down by merger-related costs and a drop in sales.

“We are not happy with our performance in the second quarter,” Karen M. Hoguet, Macy’s chief financial officer, said on a conference call Wednesday.

Macy’s shares closed down 63 cents a share, or 2 percent, to $31.10 on the New York Stock Exchange Wednesday.

While sales were weak in the second quarter, Hoguet said that furniture sales were a bright spot and that could translate into strong sales of the Martha Stewart home collection. The collection launched Aug. 2 and includes an assortment of bed, bath, entertaining and cooking products.

Earnings for the quarter that ended Aug. 4 were 16 cents a share, compared with 51 cents a share in the same quarter a year ago. But if the merger integration costs associated with Macy’s purchase of May Co. of $97 million are excluded, earnings per share were 29 cents.

Sales for the quarter were $5.89 billion, down from $5.99 billion in the second quarter of 2006.

Last September, Marshall Field’s stores officially became Macy’s as part of a nationwide conversion of 400 former May department stores to the Macy’s brand.

Hoguet said that while sales of the newly converted stores have lagged other Macy’s stores, that gap continues to narrow. However, the Macy’s North division, which includes the former Marshall Field’s stores, continues to be tough, she said.

“The turnaround at Macy’s North is going to take us longer,” Hoguet said.

The company said that for the year, earnings excluding merger costs would fall between $2.15 to $2.30. That’s off a forecast in May of between $2.45 and $2.60 in per-share profits for 2007.

Macy’s operates 850 department stores in 45 states under the Macy’s and Bloomingdale’s names. The company had sales of $27 billion in 2006, but expects 2007 sales to top out at $26.5 billion to $26.8 billion.

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