The results include two unusual items related to consolidation costs and a wage-and-hour class action lawsuit in California that negatively impacted first-quarter 2008 earnings by 16 cents per diluted share. Excluding these items, the company would have earned 2 cents a diluted share from continuing operations in the first quarter of 2008.
"Given the very difficult economic environment, our company performed relatively well compared to the competition in the first quarter," said Terry J. Lundgren, chairman, president and chief executive officer. "Macy's Inc.'s same-store sales for the quarter, while below last year, were significantly better than most of our largest competitors, continuing a trend from the fourth quarter of 2007. This indicates that customers are preferring Macy's and we appear to be capturing market share even in this period of weak consumer spending.
"Earnings per share are on track to deliver the annual guidance provided at the outset of the year," he continued. "We are running the business with discipline given the weakened level of consumer confidence, as demonstrated by inventory levels at the end of the quarter that were about 4 percent below a year ago. And as we begin implementation of new My Macy's localization initiatives across the country, we are optimistic that our plans for tailored assortments and an improved shopping experience in every location will further enhance our store-level execution."
The consolidation of three Macy's divisions announced in February 2008, is expected to save approximately $100 million a year beginning in 2009 (approximately $60 million in savings for the partial year in 2008). In the first quarter of 2008, the company booked consolidation costs of $87 million ($55 million aftertax or 13 cents a diluted share). First-quarter 2008 results also include a reserve of $23 million ($14 million aftertax or 3 cents per diluted share) for a potential settlement of litigation related to a wage-and-hour class-action lawsuit in California. A settlement is contingent on final agreement and court approval.