ST. LOUIS – May Department Stores Co. (MAY), which has agreed to be purchased by Federated Department Stores Inc. (FD), said Tuesday that first-quarter earnings fell 46 percent from last year, due to weak sales of its proprietary ladies' and men's apparel as well as seasonal clearance markdowns.
"Our 2005 first-quarter results did not meet our expectations," said John Dunham, May's chairman, president and CEO.
Net income dropped to $41 million, or 13 cents per share, for the three months ended April 30 from $76 million, or 24 cents per share, last year. Excluding store divestiture costs of $9 million, or 2 cents per share, the company earned $47 million, or 15 cents per share, in the latest quarter.
Analysts surveyed by Thomson Financial were looking for earnings of 16 cents per share in the latest quarter.
Sales rose 13.7 percent to $3.37 billion from $2.96 billion last year, but sales at stores open at least a year decreased 5.1 percent for the quarter.
"Sales of our proprietary ladies' and men's apparel brands were among our weakest performing categories, and during the quarter we took incremental markdowns to keep our proprietary apparel inventories current," Dunham said in a statement.
May said the latest quarter includes incremental markdowns of about $18 million at cost, or 4 cents per share, to facilitate seasonal clearance.
The 2005 quarter also includes the benefit of a $14 million, or 5 cents per share, income tax provision reduction due to the resolution of various federal and state income tax issues. In addition, May said it recorded about $4 million, or 1 cent per share, of merger-related costs in the 2005 period.
May noted that the integration of Marshall Field's (search) continues on track, and all system conversions were completed in April. The latest period includes Marshall Fields' start-up integration expenses of $21 million, or 5 cents per share.