Macy's raises full-year forecast, investors lock gains

By Aishwarya Venugopal

(Reuters) - Macy's Inc on Wednesday reported a surprise rise in quarterly same-store sales and raised its full-year forecasts, but its shares fell 9 percent with some analysts attributing the drop to profit taking following the stock's run-up this year.

Macy's stock was down at $37.99 in morning trading, after having surged 66 percent this year - far outperforming the S&P 500 retailing index. It has more than doubled since touching a seven-year low of $17.40 in November.

"Macy's shares may be selling off this morning as result of profit taking, despite healthy second-quarter beat and raised full-year guidance," RBC Capital Market analyst Brian Tunick said.

Research firm Retail Metrics analyst Ken Perkins echoed Tunick's view, while adding that the stock could also be reacting to a small dip in margins.

Perkins said based on his calculation Macy's gross margins dipped 20 basis points in the quarter when some full-price selling should have translated into higher gross margins.

Department stores have been wrestling with falling mall traffic and tough competition from off-price retailers and Amazon.com Inc.

In response, Macy's has closed stores, tightly controlled inventory, built its Backstage discount business and monetized prime real estate properties.

"Macy's, Bloomingdale's and Bluemercury all performed well ... Where we saw trend improvements across the portfolio," Chief Executive Officer Jeff Gennette said in a statement.

Sales at Macy's stores open more than 12 months, including sales in departments licensed to third parties, rose 0.50 percent, compared with the average analyst estimate of a 0.90 percent drop, according to Thomson Reuters I/B/E/S.

Macy's now expects full-year adjusted earnings of $3.95 to $4.15 per share, up from its prior forecast of $3.75 to $3.95 per share, and total sales to range from flat to up 0.7 percent, also above its previous target.

Excluding one-time items, the company earned 70 cents per share, much higher than analysts' expectations of 51 cents.

Net income attributable to Macy's shareholders rose to $166 million in the second quarter ended Aug. 4 from $111 million a year earlier.

Net sales fell 1.1 percent to $5.57 billion, but still topped estimates of $5.55 billion.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil D'Silva)