Macy’s Inc., the second-biggest U.S. department store chain, posted fourth-quarter profit that beat analysts’ estimates after using promotions to lure shoppers during the holiday season without cutting prices too deeply.
Net income in the three months ended Jan. 28 rose 12 percent to $745 million, or $1.74 a share, from $667 million, or $1.55 a share, a year earlier, Cincinnati-based Macy’s said Tuesday. Excluding one-time items, Macy’s earned $1.70 a share. Analysts projected $1.65, the average of 12 estimates compiled by Bloomberg News.
Macy’s profitability shrank less than analysts projected as it was able to sell women’s handbags and accessories with its planned promotions rather than by slashing prices during the holiday season. Planned promotions can be profitable while last-minute efforts to clear excess inventories erode margins.
“The results were modestly better than our expectations,” Joel Levington, head of corporate credit at Brookfield Asset Management Inc. in New York, said in an email. “Macy’s solid operational execution, and growing earnings base, has it well-positioned.”
Gross margin — the fraction of revenue left after subtracting the cost of goods sold — narrowed to 41 percent from 41.3 percent a year earlier, Macy’s said. Five analysts on average estimated the measure would shrink to 40.9 percent.
One-time items in the fourth quarter included expenses for store closings announced last month and a gain from the sale of store leases.
Revenue climbed 5.5 percent to $8.72 billion in the fourth quarter. Sales at stores open at least a year advanced 5.2 percent.
For the current fiscal year, Macy’s projected profit of $3.25 to $3.30 a share. Analysts estimated $3.27 on average.
