By Sruthi Ramakrishnan
(Reuters) - Macy's Inc (N:M) reported a weaker-than-expected rise in sales in the holiday quarter and forecast full-year profit and revenue that fell short of analysts' expectations as it invests in new lower-priced and international stores.
Macy's, which owns the upmarket Bloomingdale's chain as well as its more-affordable namesake stores, is looking to widen its customer base by attracting shoppers hunting for deals and discounts in a highly competitive retail environment.
The company said on Tuesday it would boost spending by 6 percent to $1.2 billion this year, partly to build so-called "off-price" stores that sell items such as seconds, canceled orders and returned goods at lower prices.
Upscale retailer Nordstrom Inc (N:JWN) operates such stores under the Nordstrom Rack brand. Sales under the brand rose 17 percent in the latest quarter, while total sales rose 9 percent.
"The off-price sector remains quite well-positioned, given the consumers' admiration of the brand offerings and treasure hunt atmosphere... ", Nomura Equity Research analyst Robert Drbul wrote in a client note.
Deutsche Bank (XETRA:DBKGn) analyst Paul Trussell said improving spending by middle-income shoppers, along with Macy's above-average e-commerce business and small-store expansion, could help drive revenue.
Macy's forecast earnings of $4.70-$4.80 per share for the year ending January 2016, below the average analyst estimate of $4.84, according to Thomson Reuters I/B/E/S.
The company said it expected same-store sales growth to accelerate to about 2 percent this year from 0.7 percent last year. But total sales are expected to grow only about 1 percent to $28.39 billion, shy of the average estimate of $28.63 billion.
Macy's said it would open Macy's and Bloomingdale's stores in Abu Dhabi, United Arab Emirates, in 2018 under license agreements with Al Tayer Group. Al Tayer already operates a Bloomingdale's store in Dubai.
Macy's net income fell 2.2 percent to $793 million in the fourth quarter ended Jan. 31. However, earnings-per-share rose to $2.26 from $2.16 due to a lower share count.
Excluding items, Macy's earned $2.44 per share, beating the average estimate of $2.40.
Net sales rose a lower-than-expected 1.8 percent to $9.36 billion.
Macy's shares were down 1 percent at $63.43 in morning trading on the New York Stock Exchange.