May has strong Jan., Feb. & March

By Don Hogsett -- Home Textiles Today, 5/17/2004 12:00:00 AM

ST. LOUIS —

First-quarter profits at May Department Stores Co. improved 5.6 percent, to $76 million from $72 million last year, as stronger margins and lower costs offset a handful of remaining charges tied to the shutdown of 34 underperforming Lord & Taylor department stores.

Sales at the retailer improved 3.1 percent, to $3 billion from $2.9 billion last year, while same-store sales increased 1.7 percent. Same-store sales climbed even higher, 2.5 percent, excluding results of the 19 stores that remain to be closed.

Putting a cap on bottom-line growth during the opening quarter, and acting as a partial offset to improving operations, were $5 million in restructuring markdowns stemming from inventory liquidation at shuttered stores, and another $2 million in restructuring costs.

Providing a solid boost to earnings, average gross margin widened 110 basis points, or 1.1 percentage points, to 28.4 percent from 27.3 percent a year ago. Gross margin dollars climbed 7.4 percent, to $843 million from $785 million during the same period a year ago.

In another assist, operating costs were whittled .02 percent, to $639 million from $640 million a year ago, yielding a cash savings of $1 million. When measured as a percentage of rising sales, costs were pared 80 basis points, or eight-tenths of a percentage point, to 21.5 percent from 22.3 percent.

In another prop to the bottom line, interest expense was whittled 5 percent, to $76 million from $80 million a year ago, generating another cash savings of $4 million.

In an operational improvement, stockpiles were throttled down 5 percent, to $3 billion from $3.2 billion, another savings of $158 million.

Helped by improving operations, operating profits jumped more than a third, rising 37.2 percent, to $199 million from $145 million last year. But, overall, profits rose at a more sluggish pace of 5.6 percent as the retailer paid $45 million in taxes, while last year it recorded a tax benefit of $7 million.

May Department Stores Co.