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Merger costs, weak sales hurt May’s quarterly earnings

SHARE Merger costs, weak sales hurt May’s quarterly earnings

ST. LOUIS — May Department Stores Co.'s earnings fell by nearly half in the second quarter, hurt by expenses from a pending merger with rival Federated Department Stores Inc. and disappointing same-store sales, the company said Tuesday.

Quarterly income dropped to $52 million, or 16 cents per share, in the three-month period ended July 30. That compares with $101 million, or 33 cents, a year ago. Merger-related costs amounted to about 13 cents per share, while divesting stores and a lowered tax reserve boosted earnings by about 8 cents.

Analysts surveyed by Thomson Financial projected earnings of 31 cents per share.

In February, St. Louis-based May, which owns Kaufmann's and Lord & Taylor, agreed to be taken over by Cincinnati-based Federated, owner of Macy's and Bloomingdale's, in a deal worth nearly $11 billion. Shareholders of both companies approved the takeover last month. Federated expects the deal to close in the third quarter, following completion of regulatory review.

Net sales totaled $3.45 billion last quarter, up 17 percent from $2.96 billion a year earlier. However, sales at stores open at least a year, or same-store sales, were down 1.6 percent, May said.

May operates 487 department stores under the names Meier & Frank, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Robinsons-May, Strawbridge's and The Jones Store. It also operates 243 David's Bridal stores, 452 After Hours Formalwear stores, and 11 Priscilla of Boston stores in its Bridal Group.

Six additional department stores are planned for this year, along with 14 David's Bridal and 11 After Hours stores.

For the first six months of 2005, May earned $93 million, or 29 cents per share, down from earnings of $177 million, or 57 cents per share, in the first half of 2004.

Six-month earnings for 2005 included, among other things, merger-related expenses of $67 million, or 14 cents per share, and the benefit of $32 million, or 10 cents per share, of income tax provision reductions.

Net sales for the first six months were $6.81 billion, up 15.1 percent from $5.92 billion in 2004's first half.

Federated has said it will replace 10 May nameplates when the merger is complete. The Lord & Taylor name, now on 58 stores, will stay, and Federated is studying the Marshall Field's name, a Chicago landmark. There are 60 Marshall Field's stores.

The changes mean Macy's will have a total of 730 stores across the United States in nearly every major market. Federated's decisions followed research into customer attitudes.

May's shares fell 13 cents to close at $40.07 Tuesday on the New York Stock Exchange.