Macy's Inc., the second-largest U.S. department-store company, forecast profit for its next fiscal year that is higher than analysts estimate and said it would cut 2,500 jobs to reduce costs.
Profit per share in the year through January 2015 will be $4.40 to $4.50, the Cincinnati-based company said Wednesday in a statement. The average of 19 analysts' estimates compiled by Bloomberg was $4.36. The job cuts and other actions will save about $100 million a year, Macy's said in a separate statement.
At a time when many retailers are struggling with restrained consumer spending, Macy's chief executive Terry Lundgren has kept profit growing by adding competitively priced exclusive merchandise and letting lower-level managers tailor assortments to local tastes. He's also increased online sales by fulfilling Web orders from store inventory.
"Macy's has dominated the retail scene and gained share over other retailers by giving consumers the promotions they wanted," Walter Loeb, founder of a namesake New York retail consulting firm, said in a telephone interview.
"Cutting back is also a recognition that technology has worked satisfactorily at Macy's and that a lot of their new business comes from the Internet." Macy's rose 5.4 percent to $54.65 at 4:40 p.m. in New York in extended trading. The stock advanced 37 percent last year, compared with a 30 percent gain for the Standard & Poor's 500 index.
The department-store chain also maintained its forecast that profit per share in the current fiscal year would rise to $3.80 to $3.90. Sales at stores open at least a year will rise 2.3 percent to 2.5 percent in the fourth quarter, Macy's said Wednesday. Analysts' estimated 2.7 percent, on average.
The retailer plans to report fourth-quarter results on Feb. 25.
The cost reductions entail combining its Midwest and North regions, eliminating some merchandise planning and store positions as well as central office and administrative jobs. The company also will close five stores in Arizona, Kansas, Missouri, New York and Utah. Macy's said its workforce will remain at about 175,000 employees as it adds workers in other parts of the company.
The savings will take effect in the next fiscal year after $120 million to $135 million of charges in the fourth quarter, Macy's said.
Sears Holdings Corp. is the largest U.S. department-store company by revenue.