Macy's Reports Earnings Miss, Announces Real Estate Deals

Macy's Inc. shares fell 0.7% in Thursday premarket trading after the retailer reported third-quarter earnings that missed estimates. Net income was $15 million, or 5 cents per share, down from $117 million, or 36 cents per share, for the same period last year. Adjusted earnings per share were 17 cents, missing the 41-cent FactSet consensus. Revenue was $5.63 billion, down from $5.87 billion last year, but in line with the FactSet consensus. Same-store sales for stores on an owned-plus-license basis were down 2.7%, and same-store sales for stores on an owned basis were down 3.3%. The FactSet estimate was a decline of 2.8%. The retailer expects full-year 2016 same-store sales on an owned-plus-license basis to decline in the range of 2.5% to 3%, and it continues to expect EPS in the range of $3.15 to $3.40. The FactSet consensus is for a 3% same-store sales decline and EPS of $3.37. Macy's announced a strategic alliance with Brookfield Asset Management, an alternative asset manager, giving Brookfield the exclusive right to create a "pre-development plan" for each of Macy's real estate assets, a total of about 50, for up to 24 months. Additional assets could be added. The goal is to "realize the development potential of the Macy's portfolio," the company said in a statement. Macy's has also signed contracts to sell its 248,000-square-foot Union Square Men's building in San Francisco for $250 million, and to sell its downtown Portland, Ore. store for $54 million. The Union Square deal is expected to close Jan. 2017 and the company expects to recognize a gain of about $235 million in Jan. 2018. The Portland deal is expected to close in the fourth quarter of 2016 at which time the company will see a gain of about $36 million. Macy's shares are up 9.7% for the year so far while the S&P 500 Index is up 5.8% for the same period.