Macy's Earnings Shows It Still Has Some Fight

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(Bloomberg) -- Maybe Macy's Inc. wasn't just coasting on the holiday spirit after all.

The department store giant on Wednesday said comparable sales in the first quarter were up 3.9 percent over a year earlier, blowing past analyst expectations. When you include sales at departments licensed to third parties, it was even stronger, up 4.2 percent over a year earlier. That robust growth followed upbeat holiday sales results by Macy's, providing more convincing evidence that the beleaguered chain might finally be getting on steadier footing.

Investors sent the stock soaring in early trading, and they are right to be cheered by Macy's progress. The company said its strength was broad-based across geographic regions and across its stable of brands, which includes Bloomingdale's and Bluemercury. And it bumped up its full-year earnings and comparable-sales guidance.

It appears Macy's still has some fight in it, and the chain may be wringing more sales out of initiatives such as revamping its loyalty program and improving its merchandise assortment.

Still, don't get too starry-eyed about these results. Much of the boost in comparable sales was attributable to a change in timing of a big Friends and Family sale, which took place in the first quarter this year after having landed in the second quarter last year. Macy's provided details on how its comparable sales growth would have looked without the shift in timing of the big sale event, and as you can see, it's not nearly as impressive:

And this timing shift likely means second-quarter results are going to look relatively weak compared to a year earlier. But, even with that important caveat, the adjusted growth in comparable sales is a dramatic improvement for Macy's, which has delivered three straight years of annual declines on this measure.

Macy's still has huge challenges ahead of it. The department store category, in general, has had a tough time figuring out how to lure customers at a moment when off-price giants such as TJX Cos. and upstarts such as Wayfair Inc. are providing fierce competition. And I still wonder just how much growth Macy's can wring out of key initiatives such as Backstage, the off-price section it's adding to many Macy's locations.

But, for now, Macy's has been able to stanch its bleeding, and it should be given credit for that.

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