Macy's (M) Tops Q3 EPS Views; Trims FY15 EPS Outlook; Will Not Pursue REIT Structure

Macy's (NYSE: M) reported Q3 EPS of $0.56, versus the analyst estimate of $0.54. Revenue for the quarter came in at $5.87 billion versus the consensus estimate of $6.12 billion.

Owned comps fell 3.9 percent, versus expectations of a 0.4 percent drop.

Macy’s, Inc. is pursuing the following strategic real estate initiatives:

• Based on a successful collaboration on Macy’s previously announced Brooklyn store redevelopment project, the company has engaged Tishman Speyer in an expanded relationship to advise and support the company’s senior management team in identifying and advancing potential store redevelopment projects nationwide. The company may request Tishman Speyer to participate in bidding for certain of these projects. In all cases, a third party will be used to manage the bidding and negotiations process.
• The company has begun a process to explore joint ventures or other deal structures with third parties to redevelop Macy’s flagship real estate assets in Manhattan (Herald Square), San Francisco (Union Square), Chicago (State Street) and Minneapolis (downtown Nicollet Mall) in a manner that maintains a robust Macy’s retail store presence while also bringing alternative use into those buildings; this exploration could expand to include other assets, including mall-based properties, to the extent opportunities are available.
• The company will continue to pursue selected real estate dispositions and monetize assets in instances where the business is simultaneously enhanced (such as the recently announced real estate sales of underutilized portions of properties in Brooklyn and downtown Seattle) or where the value of real estate significantly outweighs the value of the retail business (such as the recent sale of Macy’s stores in Cupertino and downtown Pittsburgh).

After extensive review with the assistance of our experienced financial, tax, legal and real estate advisors, the company has decided not to pursue the formation of a REIT at this time. The board of directors has concluded that a REIT does not offer sufficient upside potential for value creation. To the extent that circumstances change, we may revisit this alternative in the future.

While much work has been done to date, Macy’s, Inc. is continuing to analyze its real estate portfolio to identify opportunities to drive additional shareholder value. The company is open to considering additional ideas for further enhancing shareholder value while maintaining an investment-grade credit rating and an operating structure that fosters sales and earnings growth.

Guidance:

Sees FY15 EPS of $4.20 - $4.30, versus the Street at $4.65. The company was previously looking for an EPS range of $4.70 to $4.80.

For earnings history and earnings-related data on Macy's (M) click here.

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