DRAWN AND QUARTERED: Only in such a brutal fourth quarter could a department store suffer a nearly 60 percent drop in profits and come out of it declaring victory. But that’s just what Macy’s Inc. Chairman, President and CEO Terry Lundgren did last Tuesday as his firm’s quarterly profits slid 58.7 percent to $310 million, on a 7.7 percent descent in revenues to $7.93 billion.
The retailer called out “practical merchandise,” including shoes, women’s suits, fashion jewelry, cold-weather accessories and housewares, as relatively strong performers. “[These categories] are generally driven by strong value proposition and affordable newness,” Karen Houeget, EVP and CFO, said on a conference call. The results not only beat analysts’ expectations but, along with a better-than-apocalyptic outlook from the Federal Reserve’s Ben Bernanke the same day, contributed to the best performance by store stocks all year. Macy’s got a 12 percent lift in its stock price after the news, and Lundgren argued that the weak state of the economy made 2009 an ideal year to implement many of the changes being put in place, including its My Macy’s localization program and its push for more exclusive product.
Last Monday, Nordstrom reported a 67.9 percent contraction in fourth-quarter earnings, beating analysts’ estimates by a penny and projected double-digit declines in sales and earnings in the new year. The next day, its shares skyrocketed 20.8 percent, presumably on the theory that “it could have been worse” and on investors’ beliefs that, whatever headwinds the store may be facing, it is still highly valued by consumers for its service and assortments.
Then, of course, there’s the curious case of Saks Inc., which over the course of the past year has seen its stock trade as high as $17.28 and, as recently as Feb. 20, as low as $1.50. Last week, the luxury retailer reported a fourth-quarter loss that, even with the exclusion of its discontinued Club Libby Lu operation, came to more than $82 million, about twice what analysts were expecting. In a conference call, CEO Stephen Sadove defended the store’s unprecedented discounting during the fourth quarter, but admitted that some tactics may have been overly aggressive. “In certain categories, we probably didn’t have to go quite as deep,” he said on an analyst conference call. “Instead of 70 [percent] off, we probably could have gotten away with 55 or 60 percent off in shoes and handbags.” There was little in the way of optimism in discussions about 2009 and few reasons to think that luxury would reverse course. But reassuring words from Sadove — about the company’s liquidity and its ability to survive the recession — seemed to evoke warm feelings on Wall Street. As the trading day ended last Wednesday, the stock had jumped almost 13 percent to close at $2.09, its first landing above the $2 mark since Feb. 11. — ARNOLD J. KARR
DOOM and GLOOM: The Conference Board’s Consumer Confidence Index, released last week, showed that consumers’ spirits aren’t improving. In February, the monthly measure of public sentiment about the economy fell to its lowest point ever — dropping to a depressing 25 from 37.4 in January — as the Present Situation Index swooned to 21.2 from 29.7 and the Expectations Index decelerated even more quickly, down a full 15 points to 27.5. Lynn Franco, director of the Conference Board’s Consumer Research Center, noted, “All in all, not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months.” In March, analysts will be looking for signs that President Barack Obama’s stimulus package and new budget have lightened Americans’ moods. — VICKI M. YOUNG