Financial bonanza

Macy’s intense focus on tailoring its merchandise to local markets helped push the department store chain to profitability in the first quarter.

More customers who had defected to rivals returned to its stores, the chain said, helping drive better-than-expected sales.

However, the department store operator, which boosted its annual outlook last month, said it’s too early to further raise its guidance for the year because of economic uncertainty.

"We are off to a great start this year, and we have every expectation that it will continue," Karen Hoguet, Macy’s chief financial officer, told investors during a conference call.

But while Macy’s continues to see strong sales, "We don’t want to get ahead of ourselves," she added. "While the economy has been stronger than we anticipated, it is unclear how strong it really is," she said.

Macy’s Inc., based in Cincinnati, posted net income of $23 million, or 5 cents per share, for the quarter. That compares with a loss of $88 million, or 21 cents, a year ago. Revenue rose to $5.57 billion. Revenue at stores open at least a year rose 5.5 percent. The measure is a key indicator of a retailer’s health because it excludes the effects of expansion.

"With major changes now behind us, the Macy’s organization has settled in and is hitting a stride in capitalizing on the advantages of (localization)," Terry J. Lundgren, Macy’s chairman, president and CEO, said.

Hoguet said that aside from its flagship store in New York, its smallest-volume stores — those in small markets or small in size — enjoyed the biggest sales increases, confirming that its plans to tailor its merchandise to local markets is working. In the past, those stores’ business was overlooked and was the toughest to reignite, she noted.

Macy’s localization plan, dubbed My Macy’s, concentrates on putting decisions on what merchandise to stock closer to customers. It seeks to focus top talent in local markets and stay on top of trends by grouping Macy’s stores into districts of 10 to 12. That approach has allowed Macy’s to react better to local needs by putting more experienced workers on its sales floors.

The chain is making plans to expand both the Macy’s and Bloomingdale’s brands, including investments in integrating its online business with its stores.

Online sales surged 34 percent, helping to lift revenue at stores open at least a year by 0.9 percentage points during the first quarter.

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Filed under: news by Pascal