Macy's Inc. (NYSE: M) a major department store retail company, owner of the Bloomingdale's and Macy's chains, released the company's first quarter financial results this morning -- Wednesday -- before market open. Net income was well above the consensus Wall Street estimate, and the stock opened the day with a strong, positive price move even as the overall market was declining.
For the first quarter Macy's reported net income of $131 million, or $0.30 per share, on sales of 5.89 billion. These results were 470 percent and 5.6 percent better, respectively, than net income of$23 million, or$0.05 per share, and $5.57 billion of revenue reported for the same quarter of 2010. The Wall Street consensus estimate for earnings was $0.18 per share on sales of $5.86 billion.
The driving force behind the tremendous improvement in net income was the increase of operating income from 3.6 percent to 5.6 percent of sales. The increase was primarily achieved by lowering selling, general and administrative expenses from 35.8 percent of revenue down to 33.5 percent.
Macy's management also announced a doubling of the quarterlydividend. The payout will be increased from $0.05 to $0.10 per share. The record date for the next dividend is June 15. The new payout rate boosts the dividend yield to 1.4 percent.
Another item of interest in the press release was the report of online sales activity from Macys.com and Bloomingdales.com. Year-over-year online sales were up 38 percent for the quarter. Online sales are included in the company's same store sales reports and added 1.3 percent to the same-store sales numbers.
In conjunction with the strong first quarter results, Macy's management boosted earnings guidance for the full year 2011. The company is now forecasting earnings per share of $2.40 to $2.45 for the year. This is a 15 cent per share increase over the previous guidance. Same store sales results are forecast to increase by 4.3 percent for fiscal year 2011.
The consensus 2011 earnings estimate is currently $2.34 per share. With the new guidance from Macy's management, the Wall Street analysts will soon be boosting their own estimates. For 2010, Macy's earned $2.09 per share, so earnings are forecast to grow by 15 to 17 percent for 2011. At $28 per share, M is trading at 11.7 times the low end of the 2011 earnings guidance range.
The strong first quarter blowout of the earnings estimate bodes well for the rest of the year. The company provided strong, positive earnings surprises for the second and third quarters of 2010. Macy's appears to be on a path to repeat those surprises again this year. With the share price up almost 9 percent today, investors may want to wait for the inevitable share price pull back to pick up some shares.
