• Q1 net profit grows 3.2%
  • Gross margin narrows to 38.9%
  • Sales fall 1.7%
Macys CEO Terry Lundgren said business trends were soft in January through March

Macy's CEO Terry Lundgren said business trends were soft in January through March

Macy's delivered solid results in a challenging retail environment, an analyst has said, despite the US department store retailer booking a drop in first-quarter sales and narrowing margins.

In the three months ended 3 May, net profit totaled US$224m. This was an increase of 3.2% on earnings of $217m a year earlier.

Gross margin narrowed slightly to 38.9% from 38.8% in the prior year quarter.

Sales, however, were down 1.7% to $6.28bn. On a comparable sales basis, revenues dropped 1.6%. Together with sales from departments licensed to third parties, first quarter sales on a comparable basis were down 0.8%.

Macy's CEO Terry Lundgren said business trends were soft in January through March, but improvements were seen in April when the weather began to turn in northern climate zones.

"We see this as a good sign moving forward into the second quarter. In addition to weather, first quarter comparisons were negatively impacted by a calendar shift for our popular 'friends & family' event and the fact that we were up against a very strong first quarter last year," he added.

Macy's said it has a positive outlook for 2014 and reaffirmed its full-year guidance of comparable store sales growth of 2.5-3%, and earnings per diluted share of $4.40-4.50.

Stifel analyst, Richard Jaffe, said: "The company indicated that sales trends improved in April when the weather moderated, leading us to believe merchandise in stores is on-trend and pent up demand will likely help drive traffic in 2Q.

"We believe the development of more trend-right, fashion product will drive positive comp sales longer term."