Macy's, Ralph Lauren margins slip; shares down

Wed Nov 9, 2011 9:28am EST
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(Reuters) - Rising cotton prices and other costs took a toll on quarterly margins at Macy's Inc (M.N: Quote) and Ralph Lauren Corp (RL.N: Quote), pressuring shares of both the department store operator and the clothing maker.

Macy's shares were down nearly 4 percent in premarket trading, while Ralph Lauren fell more than 6 percent.

Both companies still beat Wall Street earnings estimates, as Ralph Lauren's revenue exceeded expectations and Macy's sales gains continued to outpace those of its rivals.

But Macy's gross margin slipped 0.6 percentage points to 39.4 percent during the quarter. At Ralph Lauren, it fell 1.4 points to 56.6 percent.

Macy's, Ralph Lauren and other retailers and apparel makers have raised prices in recent months to try to pass on a large part of the increase in cotton, transportation and other costs to shoppers. Reduced margins indicate that a company has had to absorb some of that.

Macy's also gave a holiday-quarter profit forecast below analysts' estimates, suggesting the threat to margins is bigger than Wall Street expected.

The company expects earnings of $1.52 to $1.57 per share for the quarter, while analysts on average were expecting $1.66, according to Thomson Reuters I/B/E/S.

Last week, Macy's, which has regularly outpaced rivals like J.C. Penney Co Inc (JCP.N: Quote) and Kohl's Corp (KSS.N: Quote), reported slower-than-expected October sales, a rare disappointment.

Macy's, whose fleet includes about 810 namesake stores and Bloomingdale's, reported net income of $139 million, or 32 cents a share, for the third quarter ended on October 29, compared with $10 million, or 2 cents a share, a year earlier.   Continued...

<p>A Macy's department store is seen in San Francisco, California February 2, 2009. REUTERS/Robert Galbraith</p>