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Macy's bests guidance in Q4

CINCINNATI — Macy's reported fourth-quarter sales and earnings growth that exceeded company expectations, prompting it to issue new guidance for 2013. 

"2012 was another great year in our company's evolving story of growth. The numbers reflect our success in pursuing the right strategies, and executing them with conviction in every part of the business with a talented team we consider to be the best in retailing," said Terry Lundgren, chairman, president and CEO of Macy's, Inc. "We again added more than $1 billion in top-line sales growth in 2012. Comp sales rose by 3.7% for the year, on top of increases of 5.3% in 2011 and 4.6% in 2010. Earnings per share grew by double-digits for the fourth consecutive year. Operating cash flow continued to be strong, and we used excess cash to repurchase shares and double the dividend. 

"The best news of all is that we continue to see significant upside opportunity ahead in those strategies that have worked so well since we reorganized the company in 2009. Going into 2013, our team is moving ahead with new plans and actions to sharpen our approach to localized merchandise assortments and marketing, which we continue to believe is Macy's sustainable competitive advantage. We are accelerating progress in omnichannel strategies at Macy's and Bloomingdale's to bring together our efforts in stores, online and mobile in a manner that satisfies emerging shopping patterns and capitalizes on the strength of our inventory regardless of where the customer demand occurs. And we are engaging shoppers in a manner that engenders loyalty and builds our business with each individual customer," he said. 

Earnings were $1.83 per diluted share for the 14-week fourth quarter of 2012. Diluted earnings per share were $2.05 in the fourth quarter of 2012, excluding pre-tax expenses of $133 million ($85 million after tax or 21 cents per share) associated with the early retirement of approximately $700 million of outstanding debt, and approximately $5 million in pre-tax expenses ($3 million after tax or 1 cent per share) related primarily to the store closings announced on Jan. 3. 

In the 13-week fourth quarter of 2011, earnings were $1.74 per diluted share. Diluted earnings per share were $1.70 in the fourth quarter of 2011, excluding pre-tax gains of $54 million ($34 million after tax or 8 cents per share) from the sale of store leases related to the 2006 divestiture of Lord & Taylor, and approximately $29 million in pre-tax expenses ($18 million after tax or 4 cents per share) related primarily to store closings. 

For the 53 weeks of fiscal 2012, Macy's Inc. earned $3.24 per diluted share. Earnings per diluted share were $3.46 for fiscal 2012, excluding pre-tax expenses of $137 million ($87 million after tax or 21 cents per share) associated with the early retirement of outstanding debt, and $5 million in pre-tax expenses ($3 million after tax or 1 cent per share) related primarily to store closings. The $3.46 per share compares with management's initial guidance provided at the beginning of the year for earnings per diluted share, excluding such items, to be in the range of $3.25 to $3.30 per diluted share in fiscal 2012. 

For the 52 weeks of fiscal 2011, Macy's Inc. earned $2.92 per diluted share. Earnings per diluted share were $2.88 for fiscal 2011, excluding pre-tax gains of approximately $54 million ($34 million after tax or 8 cents per share) from the sale of store leases related to the 2006 divestiture of Lord & Taylor, and approximately $29 million in pre-tax expenses ($18 million after tax or 4 cents per share) related primarily to store closings. 

Sales for the fourth quarter totaled $9.35 billion, an increase of 7.2%, compared with sales of $8.724 billion in the 13-week fourth quarter last year. On a same-store basis, Macy's Inc.'s fourth quarter sales were up 3.9%. 

The company's total sales for the 53 weeks of fiscal 2012 totaled $27.7 billion, up 4.9% from total sales of $26.405 billion in the 52 weeks of fiscal 2011. Same-store sales were up 3.7%. 

The company's online sales (macys.com and bloomingdales.com combined) were up an impressive 47.7% in the fourth quarter and 41% for fiscal 2012 compared with the same periods in 2011. Online sales positively affected the company's same-store sales by 3.3 percentage points in the fourth quarter and 2.2 percentage points in fiscal 2012 as a whole. 

In fiscal 2012, the company opened a total of seven stores and closed eight stores.

For fiscal 2013, the company is assuming same-store sales growth of approximately 3.5% in fiscal 2013. Guidance for earnings per diluted share in fiscal 2013 is $3.90 to $3.95. Capital expenditures for the year are expected to be approximately $925 million.