By ANNE D'INNOCENZIO, Associated Press
NEW YORK (AP) — Macy's Inc. sent out a mixed message: It raised its annual profit guidance but told investors Wednesday that Superstorm Sandy would temper the start of the holiday season.
The department store chain's fourth-quarter profit forecast was below analysts' expectations and noted that this month's business would be negatively impacted by Sandy. That puts more pressure on December and January to achieve its sales goals.
The guidance came as Macy's posted a 4.3 percent increase in third-quarter net income, helped by its efforts to tailor merchandise to local markets and bring in trendy exclusive brands.
"Were it not for Hurricane Sandy, we would be even more optimistic about the fourth quarter than what you're hearing today," Karen Hoguet, Macy's chief financial officer told investors during a call. The company closed the book on the third quarter two days before Sandy steamed through the densely populated Mid-Atlantic and Northeast regions.
As a result of Sandy, Macy's extended a sale for customers living in the hard-hit region and was issuing coupons on home goods for those who've experienced damaged to their homes.
The company, which operates upscale Bloomingdale's in addition to its namesake chain, temporarily closed 200 stores at one point last week because of Sandy. But the impact goes beyond that. Hoguet said that customers in the hard hit areas of Long Island and New Jersey "have other priorities right now." Many are dealing with transportation issues to power outages to more serious problems like the loss of personal property, she noted.
Macy's Inc., a standout among its peers throughout the economic recovery, is the first of the major retailers to report third-quarter results that should provide insight into Americans' mindset heading into the crucial holiday season. Shoppers are already dealing with a slow economic recovery. Sandy is adding to their troubles.
The fear: consumers who are now being forced to buy cleanup supplies and pay for expensive repairs in the aftermath of the storm may feel less inclined to spend for the holidays. The storm hit a densely packed region, which accounts for about 24 percent of total U.S. retail sales excluding autos, according MasterCard Advisors' SpendingPulse.
Still, Hoguet told investors she is confident that Macy's business will remain resilient despite the disruptions to business.
"We have no intention of deviating from this path of growth," Hoguet told investors. "Hurricane Sandy was a terrible disaster and has affected our business in the short term. We are sensitive to the interruption it has caused to our customers and to our associates. But we, along with our communities, are bouncing back and look forward to a very good fourth quarter."
To attract holiday shoppers, Macy's says it will be offering "new and fresh merchandise" assortments and "an engaging shopping experience" throughout the November and December period, which accounts for as much as 40 percent of merchants' annual sales. Macy's will again be opening its doors at midnight following Thanksgiving for the official start of the holiday season.
Macy's has been catering to local customers in a way that had been lacking since the chain ditched its numerous regional nameplates such as Marshall Field's and Hecht's. That means focusing on tailoring merchandise to local markets, like offering more business suits in Washington, D.C.
The company has also been doing well with its exclusive brands including Material Girl, a teen brand that is a collaboration with Madonna's teenage daughter Lola.
Analysts also say that Macy's is benefiting from the troubles at rival J.C. Penney, which implemented on Feb. 1 a new pricing plan that hasn't yet resonated with shoppers. The plan involves dumping hundreds of sales events in favor of every day lower pricing. Penney is expected to report its third consecutive quarter of losses and slumping sales on Friday when it reports its third-quarter results.
Hoguet didn't comment Wednesday on how Penney's troubles were affecting its business.
Macy's Inc. earned $145 million, or 36 cents per share, for the three-month period ended Oct. 27. That compares with $139 million, or 32 cents per share, in the year-ago period.