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Macy's To Beat Analyst Estimates And Cut Jobs

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Macy's To Beat Analyst Estimates And Cut Jobs

What a difference a few months can make.

Macy’s (NYSE: M), the country’s second-largest department store chain, said it would beat analysts' estimates for profit through January 2015. In a statement, the company forecast profits per share of $4.40 to $4.50.

According to Bloomberg, the average of 19 analysts’ estimates came in at $4.36.

As recently as August, the company was in the midst of efforts to counter what CFO Karen Hoguet called consumers “choosing to make purchases in non-department store categories.” Hoguet’s remarks were made in the wake of a Q2 1.6 percent decline in transactions.

Now the picture is quite different.

Some might say Macy’s was doing what it said it would do, cut costs and redirect consumer spending. Macy’s chief executive officer, Terry Lundgren has managed the redirection by giving lower-level managers more flexibility and by adding more competitively priced merchandise to stores.

In addition, in an effort to save nearly $100 million a year, the company said it would cut about 2,500 jobs and initiate some other cost savings measures moving forward.

Related: Macy's Will Ramp Up Marketing To Counter Slow Sales

Putting more efforts into integrating online and in-store sales has also helped. Richard Jaffe at Stifel Financial Corp. told Bloomberg, “They are running a good business and hats off.” Stifel has a Buy rating on Macy’s.

The layoffs came as somewhat of a surprise, but were all part of an overall plan to consolidate regional management and restructure staff.

In a statement Lundgren said, "[W]e have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers."

This led Gilford Securities analyst Bernie Sosnick to say, "The end result is extremely favorable, proactive, what you'd expect from a heads up management such as Macy's."

The company said that following the cuts, consolidations, and the closing of five stores, it would retain appropriately 175,000 associates in 844 stores. In addition, Macy’s said it would continue with plans to open eight new locations in the future.

Looking at the big picture, CEO Lundgren said, “Our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s.” He added, “We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope. As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers.”

Following announcement of the planned layoffs, Macy’s shares rose 6 percent in after-hours trading Wednesday.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

 

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