By Nicole Maestri
NEW YORK (Reuters) - Macy's Inc reported a quarterly loss on Wednesday, hurt by restructuring costs and falling sales, but the department store operator stood by its full-year earnings forecast and its shares rose as much as 8 percent.
"Given the very difficult economic environment, our company performed relatively well compared to the competition in the first quarter," Chairman Terry Lundgren said in a statement.
He added, "Earnings per share are on track to deliver the annual guidance provided at the outset of the year."
But Macy's, whose shares had fallen 7 percent this year through Tuesday, expects the U.S. economic environment to remain challenging at least through the third quarter. It said it would need an earlier and stronger recovery to hit the high end of its full-year same-store sales forecast.
"We do not know when the environment will improve and, therefore, the key will be maintaining flexibility," Chief Financial Officer Karen Hoguet said on a conference call.
"Our merchants must ... be conservative in placing inventory orders, and we also have to have contingency plans in place to be ready to reduce expense and capex further should our sales trends not start to improve."
Macy's, which operates its namesake and Bloomingdale's chains, said it lost $59 million, or 14 cents a share, in its fiscal first quarter, ended May 3, compared with a profit of $36 million, or 8 cents a share, a year earlier.
Excluding restructuring costs of 13 cents per share and a reserve of 3 cents per share for a potential litigation settlement, Macy's earned 2 cents per share from continuing operations. On that basis, analysts' average forecast was a loss of 2 cents per share, according to Reuters Estimates.
RESTRUCTURING TO IMPROVE SALES
To try to cut costs and improve sales, Macy's has consolidated several regional divisions and launched "My Macy's" -- an attempt to better match the merchandise in its stores to the demands and trends of local markets.
But it is trying to improve sales at the same time U.S. shoppers have become hesitant with their spending, pulling back on trips to the mall and purchases of clothes, jewelry and furniture as gas prices soar and home values sink.
Macy's said first-quarter sales fell 3 percent to $5.75 billion. Sales at its stores open at least a year, a key retail gauge known as same-store sales, fell 2.6 percent.
Liz Dunn, a retail analyst with Thomas Weisel Partners, said the same-store sales decline was less severe than those at competitors like Kohl's Corp , J.C. Penney Co Inc and Nordstrom Inc .
"Macy's seems to be performing better than others relative to last year in its own stores," she wrote in a research note.
Lundgren said Macy's appears "to be capturing market share even in this period of weak consumer spending."
Sales were strongest in the Northeast and Texas, and weakest on the West coast and in Florida, Hoguet said.
She said feminine apparel was the "toughest" category in the quarter, while its men's business did "relatively better" and its home business was mixed.
Its upscale Bloomingdale's division had a "tougher" quarter, Hoguet said, and is doing "worse than they had been doing."
Upscale retailers like Bloomingdale's are considered somewhat immune from the economic downturns because they cater to higher-income shoppers who are less susceptible to rising gas and food prices.
But even high-end retailers like Neiman Marcus and Nordstrom have noted that sales have softened as shoppers take a more cautious approach to spending.
Hoguet did say that Macy's sales in the month of May have "started off well."
The retailer backed its profit forecast of $1.85 to $2.15 a share for 2008, excluding one-time items. It also said it still expects same-store sales for its fiscal year to range between down 1 percent to up 1.5 percent.
Macy's shares were up $1.15 to $25.21 in midday trade on the New York Stock Exchange after rising as high as $26.09 earlier in the session.
(Editing by Dave Zimmerman and John Wallace)