(AP) NEW YORK - Macy's Inc. (M) reported a 38 percent increase in its first-quarter profit as the department store chain continues to reap benefits from its move to tailor its fashions to local markets.
The results disclosed Wednesday beat Wall Street's expectations. But its shares fell more than 4 percent in premarket trading as Macy's failed to boost its earnings guidance.
Investors were hoping that the chain would benefit from key rival J.C. Penney's move to a new price strategy that will take time to resonate with shoppers.
Macy's, which also operates the upscale Bloomingdale's chain, said Wednesday that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. That's up from $131 million, or 30 cents per share, a year ago.
Revenue rose 4.3 percent to $6.14 billion from $5.89 billion a year ago.
Analysts surveyed by FactSet had expected earnings of 40 cents per share on revenue of $6.14 billion.
"The momentum in our business at Macy's and Bloomingdale's continued to build in the first quarter, with sales and earnings exceeding our expectations going into the year," Terry J. Lundgren, Macy's chairman, president and CEO, said in a statement. "The quarterly data clearly demonstrates the strength of our results as we continue to implement our strategies."
Macy's is the first in a series of major retailers reporting first-quarter results that should offer clues into consumer spending, which accounts for 70 percent of U.S. economic activity.
A flurry of economic data has sparked worries over a spring slowdown for the third year in a row. Companies have slowed their hiring in March and April. The stock market has lost momentum as the European debt crisis accelerates. And housing remains weak. April's retail sales report also showed a pullback from shoppers but warm weather and an early Easter helped to pull sales forward. Analysts believe that May results will offer more clarity on the consumers' mindset.
Macy's has been able to deftly navigate is way through the recession and a slow recovery by embracing its own initiatives. The chain has benefited from the strategy Lundgren conceived to localize merchandise to regional markets as consumer spending slowed down in 2007. A better trained sales force also helped. Such strategies have helped to outperform its peers.
Revenue at stores open at least a year climbed 4.4 percent for the quarter. That compares with rival Kohl's, which posted a meager 0.2 percent increase. J.C. Penney is expected to post a decline for that measure as it is in the middle of implementing an overhaul in a new pricing strategy, launched Feb. 1. The pricing strategy focuses on everyday prices and deeper promotions that last an entire month.
Still, Macy's only slightly increased its annual guidance for revenue at stores open at least a year. It now expects that figure to be up 3.7 percent, compared with its earlier guidance of 3.5 percent.
Macy's reaffirmed its earnings guidance for the year of $3.25 to $3.30 per share. Analysts had expected $3.39 per share, according to FactSet.
Macy's shares fell $1.73, or 4.4 percent, to $37.78 in trading 30 minutes before the opening bell.