Restructuring costs spike May profits

By Don Hogsett -- Home Textiles Today, 8/18/2003 12:00:00 AM

ST. LOUIS —

Weighed down by $318 million in restructuring costs tied to the shutdown of 34 stores, including 32 Lord & Taylor units, May Department Stores Co. recorded a second-quarter loss of $110 million, compared with a year-before profit of $69 million.

Pulling one-time items out of the equation for both this year and 2002, the retailer posted a profit of $92 million, down 13.2 percent from $106 million last year.

Sales at the department store retailer were virtually flat, slipping by 1.0 percent, to $3.0 billion, in the midst of a tricky retail environment, particularly for department stores. But same-store sales declined by 3.1 percent.

The top-line results reflected a marked improvement over a weak first quarter, when overall sales declined by 7.2 percent and same-store sales tumbled by 8.8 percent.

With sales still under pressure and goods being moved at markdown prices to clear out excess inventory, average gross margin thinned by 70 basis points, or seven-tenths of a percentage point, to 29.4 percent from 30.1 percent a year ago.

Reflecting the lower level of sales, operating costs climbed modestly higher as a percentage of sales, by 20 basis points, to 21.9 percent from 21.7 percent a year ago. But measured in absolute dollars, operating costs were unchanged at $657 million.

Slipping along with the falling margins and falling sales, operating profits fell by 11.4 percent, to $225 million from $254 million.

Keeping a watchful eye on stockpiles, May reduced its inventories in the period by 2.0 percent, to $2.9 billion from $3.0 billion in the year-ago period.

May Department Stores Co.