NEW YORK – May Department Stores Co (MAY), parent of Lord & Taylor (search) and David's Bridal (search) retail chains, on Tuesday posted higher quarterly profit, helped by cost savings and sales of items like handbags and jewelry.
The company, whose shares rose as much as 7 percent in morning trade, also said it had "a good start" in its early fall selling on strong demand for apparel and denim.
But May also noted that overall second-quarter sales did not meet its expectations, and it blamed weaker demand for casual sandals, shorts, seasonal apparel and home furnishings.
St. Louis-based May said it earned $110 million, or 36 cents per share, excluding restructuring costs, in its second quarter ended July 31. This compared with $92 million, or 30 cents per share, a year earlier. Net sales fell 1.5 percent to $2.96 billion from $3.00 billion.
Analysts, on average, had been expecting May to earn 35 cents per share, according to Reuters Estimates.
On a net basis, the retailer earned $101 million, or 33 cents, including restructuring costs of 3 cents a share, compared with a net loss of $110 million, or 39 cents a share, in the year-ago period.
"May's solid earnings performance, despite its soft comps, is an indicator that most retailers will report strong second quarter earnings," Merrill Lynch analyst Stacy Turnof said in a research note.
Sales at stores open at least a year, a key gauge in retail known as same-store sales, fell 2.2 percent for the quarter.
Excluding the remaining 15 stores which it previously said it would divest, same-store sales fell 1.6 percent.
"Although sales were generally sluggish in June and July, earnings should be strong, even better than expected, because the strong sell through in May and reduced clearance in June and July should have boosted gross margins strongly, probably higher than most investors were expecting."
The company also said $350 million of the $380 million previously announced restructuring charges have been recorded.
On its conference call, May said its divestiture of the underperforming Lord & Taylor stores is moving more quickly than anticipated, and Chief Financial Officer Thomas Fingleton said fewer s than 10 stores will remain open at year-end.
May's gross margin rate improved in the second quarter, largely due more full-priced selling and and fewer markdowns. Inventories are 6 percent below last year on a same store basis.
Separately, May, along with other parties, agreed to settle charges that they conspired to block another retailer from selling Lenox and Waterford brand tableware. May would not confirm the amount it paid, but New York's attorney general said it was $800,000 of a total $2.9 million settlement.
May closed its acquisition of Marshall Field's in July. It now runs 62 department stores under the Marshall Field's name.
May, which traditionally has not hosted an earnings conference call, said with the acquisition of Marshall Field's "significantly" increasing the size of the company, it was a "natural time to begin this process."
May shares were up 88 cents, or about 3.5 percent, at $25.78 on the New York Stock Exchange (search). It was also the stock's biggest one-day percentage gain in more than 15 months.