Macy's Miracle on 34th Street

The 1947 film “Miracle on 34th Street” tells the story of a child affected by a Macy’s Christmas Santa Claus. If only the main characters believed in Santa, their most precious dreams would come true. Macy’s Inc. (NYSE: M) reported barely believable figures for the most recent quarter. This turns around a tragic string of numbers that have been hard on investors.

Macy’s posted revenue of $5.23 billion, just above analyst expectations. Earnings on an adjusted basis came to $0.52 per share, well above what Wall Street expected.

CEO Jeff Gennette did undermine his optimism a little. He said he saw a slowdown in sales at the end of the most recent quarter. However, he held to the retailer’s full-year forecast. That, given the economic environment, is a miracle in itself. Jeff Gennette told CNBC he was unsure. “Is that a slowdown in the consumer confidence that we are going to take all the way through the fourth quarter?”

Comparable sales at Macy’s flagship division fell 4.4% on an owned basis. Bloomingdale’s same-store sales increased by 5.3%. Sales at the Blue Mercury division surged 14.0%.

Inventory, which has been a problem for Macy’s, rose only 4% from last year. This should allow Macy’s to end the problem of excess inventory, which usually leads to discounts.

While net income did skid, it was still positive at $108 million, compared to $239 million last year.

The only real mystery about Macy’s figures is that Gennette continues to push his Polaris strategy. Almost no one knows what that is, so he could skip the reference.

Gennette should get credit for a turn in the right direction.

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