Macy's (M) Trades Higher Following Q3 Win; FY10 EPS Outlook Boosted; Deutsche Bank Weighs In

November 10, 2010 11:00 AM EST
Macy's, Inc. (NYSE: M) shares are trading higher this morning following the company's third quarter earnings release, which came out this morning. Shares are up about 0.4%.

The retailer reported operating income of $177 million, or an EPS of $0.02, compared to $55 million in Q309. Adjusted for expenses associated with the repurchase of debt in the third quarter, EPS came in at $0.08.

Sales for the company were $5.623 billion, an increase of 6.6% from $5.277 billion in the third quarter of 2009. Comps were up 3.9%.

Overall, analysts were looking for an EPS of $0.03 and revs of $5.55 billion.

Gross margin for the quarter also decreased 20 basis points to 40%. Online sales increased 24% from Q309, and positively impacted same-store sales by 0.8%.

Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc., commented "we are productively using the significant amount of cash being generated by our business to further strengthen our balance sheet. In 2010, we have retired a total of more than $1.2 billion of debt using excess cash. This includes $1 billion in repurchase transactions on the open market in the first and third quarters, as previously announced."

Going forward, Macy's increased their outlook from H210, same-store sales outlook up from 3% - 3.5% to 3% - 4%, and an EPS outlook of $1.50 - $1.55.

FY10 EPS outlook is increase from $1.89 - $1.94 to $1.94 - $1.99, ex-items. Analysts are looking for an EPS of $1.94.

Commenting on the results, Deutsche Bank noted that inventories were well controlled, increasing 1.9% versus the 6.6% gain in sales. Deutsche was surprised that gross margins fell 25 basis points on comps that increased 3.9%. The FY10 outlook now implies an Q410 EPS of $1.46 - $1.51.

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