FILE - In this Nov. 3, 2011, file photo, a person enters a Macy's department store in North Attleboro, Mass. Macy's Inc. said Wednesday, May 9, 2012, that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. (AP Photo/Steven Senne, File)
FILE - In this Nov. 3, 2011, file photo, a person enters a Macy's department store in North Attleboro, Mass. Macy's Inc. said Wednesday, May 9, 2012, that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. (AP Photo/Steven Senne, File)
In this May 6, 2012, photo, a man waits to cross an intersection with a Macy's bag near a Macy's department store in New York. Macy's Inc. said Wednesday, May 9, 2012, that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. (AP Photo/CX Matiash)
This May 6, 2012, photo, shows a Macy's department store in New York. Macy's Inc. said Wednesday, May 9, 2012, that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. (AP Photo/CX Matiash)
FILE - In this Sept, 29, 2011, file photo, Elsy Santiago, left, and her sister Betsy, exit a Macy's in Hialeah, Fla. Macy's Inc. said Wednesday, May 9, 2012, that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. (AP Photo/Alan Diaz, File)
NEW YORK (AP) ? Macy's Inc.'s first-quarter profit rose a better-than-expected 38 percent. But investors sent its shares down because the department store chain left its annual profit guidance intact.
Macy's is the first in a series of major retailers reporting first-quarter results that should offer clues into what consumers are doing with their money. Consumer spending accounts for 70 percent of U.S. economic activity.
The owner of Macy's and Bloomingdale's stores has outmatched many of its peers. But investors' reaction ? Macy's shares fell 3.6 percent by midafternoon ? show they will dissect every merchants' earnings report amid increasing worries about an economic slowdown.
"Macy's is doing really well, but the market may have been expecting them to do even better," said Brian Sozzi, chief equities analyst at NBG Productions, an independent research firm. "It comes at a time when concerns about consumer spending are being ratcheted up."
Recent economic data has sparked worries over a spring slowdown for the third year in a row. Companies slowed their hiring in March and April. The stock market has lost momentum amid an accelerating European debt crisis. And April's sales reports from retailers, including from Macy's, showed a pullback by consumers despite unusually warm weather and an early Easter. Macy's said Wednesday that sales bounced back in May, but analysts will be studying other stores' results to get more clarity on shoppers' behavior.
Like many department stores, Macy's suffered during the depths of the recession, but it has been able to deftly navigate through the slow recovery. It benefited from its move in 2007 to tailor its fashions to local markets. A better trained sales force also helped. The company has also locked in exclusive brands including its Material Girl fashion collection, created by pop star Madonna and her daughter Lourdes, and Tommy Hilfiger sportswear.
Macy's revenue has also been boosted by its online division, which enjoyed a 33.7 percent sales increase in the quarter. Online sales account for 7 percent of the company's total business.
Such initiatives helped boost the company's first-quarter results.
Macy's, based in Cincinnati, said that its net income rose to $181 million, or 43 cents per share, for the three-month period ended April 28. That's up from $131 million, or 30 cents per share, a year ago.
Revenue rose 4.3 percent to $6.14 billion from $5.89 billion a year ago.
Analysts surveyed by FactSet had expected earnings of 40 cents per share on revenue of $6.14 billion.
Macy's revenue at stores open at least a year climbed 4.4 percent for the quarter. That's well above Kohl's 0.2 percent increase. J.C. Penney is expected to post a decline as it's in the midst of overhauling a new pricing strategy, launched Feb. 1. Penney got rid of hundreds of sale events and instead is focusing on everyday prices and deeper promotions that last an entire month. That's making some Penney shoppers, who are used to seeing big discounts, flee to other stores like Macy's and Kohl's.
Kohl's is slated to report results Thursday, while J.C. Penney will report its fiscal results late Tuesday. Penney stopped reporting its sales figures on a monthly basis since February.
Macy's Chief Financial Officer Karen Hoguet told analysts during a conference call Wednesday that the chain was seeing a pickup in sales at stores that shared the same mall with Penney's. But she declined to elaborate.
According to a survey of J.C. Penney customers conducted by Citi Investment in March, 10 percent of Penney's shoppers plan to shop more at Macy because of their confusion over pricing. The average income for J.C. Penney shoppers is $60,200, slightly lower than the $72,200 figure for Macy's, according to Richard Hastings, a consumer strategist with Global Hunter Securities.
Still, Macy's only slightly increased its annual guidance for revenue at stores open at least a year. It now expects that figure to be up 3.7 percent, compared with its earlier guidance of 3.5 percent.
Macy's reaffirmed its earnings guidance for the year of $3.25 to $3.30 per share. Analysts had expected $3.39 per share, according to FactSet.
When asked by an analyst during the call why Macy's didn't raise its profit guidance, Hoguet responded that its outlook for the year "was more aggressive than usual."
Macy's shares fell $1.45, or 3.6 percent, to $38.07 in afternoon trading. They peaked for the past year at $42.17 a week ago. They traded as low as $22.66 in mid-August.
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