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updated: 5/15/2013 9:51 AM

Macy's profit tops estimates as stock buyback boosted

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Bloomberg News

Macy's Inc., the second-largest U.S. department-store chain, reported fiscal first-quarter profit that beat analysts' estimates and increased its share buyback program by $1.5 billion. The shares advanced.

Net income in the period ended May 4 rose 20 percent to $217 million, or 55 cents a share, from $181 million, or 43 cents, a year earlier, Cincinnati-based Macy's said today in a statement. Analysts projected 53 cents, the average of estimates compiled by Bloomberg.

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Chief Executive Officer Terry Lundgren has been tailoring merchandise to match local tastes and extending exclusive goods, from Madonna-inspired shoes to Keds apparel, to draw younger customers. Profit was helped by controlled selling, general and administrative expenses as well as a lower tax rate, Deborah Weinswig, a Citigroup Inc. analyst, wrote in a note today.

Macy's rose 0.7 percent to $47.73 at 10:15 a.m. in New York. The shares had gained 21 percent this year through yesterday, compared with a 16 percent gain for the Standard & Poor's 500 Index.

The increased buyback means Macy's had $2.6 billion authorized for share repurchases as of May 4. The company raised its dividend by 25 percent. The quarterly dividend will rise to 25 cents a share, with the first one payable July 1 to shareholders of record as of June 14, Macy's said.

Expenses shrank to about 32 percent of sales, a 52 basis- point drop. A basis point is 0.01 percentage point. Weinswig, who is based in New York and recommends buying the shares, had estimated a 27 basis point reduction.

Revenue rose 4 percent to $6.39 billion, matching analysts' estimates. Sales at stores open at least a year climbed 3.8 percent.

Sales gains were crimped by bad weather, Michael Binetti, an analyst with UBS AG, wrote in note today.

"We were heartened" by the share buyback and the dividend increase, wrote Binetti, who is based in New York and rates the shares neutral, the equivalent of hold.

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