Macy’s (NYSE: M) posted third-quarter earnings that topped analysts’ estimates, and raised its full-year EPS forecast to $1.94-$1.99, raising the previous low end of the range by 5 cents a share. Macy’s had already raised its guidance for the second half of the fiscal year from $1.45-$1.50 to $1.50-$1.55, so the new guidance for the full year just reflects that.
Macy’s is the first of the large retailers to report third-quarter results. Other retailers reporting earnings this week include J.C. Penney (NYSE: JCP) and Kohl’s (NYSE: KSS). Next week we’ll see earnings from Saks (NYSE: SKS), Nordstrom (NYSE: JWN) and Wal-Mart Stores (NYSE: WMT).
Macy’s earned 8 cents a share, excluding items, beating estimates of 3 cents a share. Sales of $5.62 billion also beat estimates of $5.55 billion. Gross margins were off just 0.2% and operating income of $177 million came in at 3.1% of sales, way up from last year’s third-quarter operating income of $55 million.
The big question remains the outlook for the coming holiday season. Macy’s had little to say other than that the gains it has made so far this fiscal year “bode well for our business as we enter the holiday selling season.”
Last month, the National Retail Federation issued a slightly upbeat forecast for the 2010 holiday season. According to an NRF-sponsored survey, shoppers plan to spend an average of $688.87 on holiday shopping this year, up about 1% from last year’s average of $681.83.
Some signs of improvement in the unemployment numbers may also help retailers this holiday season. The U.S. Labor Department reported a drop in initial unemployment claims of 24,000 for last week, a larger-than-expected drop. The seasonally adjusted total fell to 435,000, only the second time this year that it has come in below 450,000.
The most recent jobs report noted that the U.S. created 151,000 jobs in October, its biggest jump since April. The unemployment rate, 9.6%, did not fall, but the job gains could continue. Retailers are on track to hire more temporary workers for this holiday season than for any of the past three seasons. Retail payrolls increased by almost 151,000 in October, about three times more than October 2009 and more than four times more than 2008. More workers will get temporary jobs in retailing in November and December, but the industry is still likely to fall short of the average 700,000 seasonal workers added in the fat years of 2004-2007.
Better news on employment, and decent third-quarter earnings from retailers could well point to a better holiday season than we’ve had for the past few years.
