Macy's Lowers Its Q4 And Full Year Guidance

Macy's Inc. (NYSE: M) announced on Friday it has completed a previously announced and expected real estate transaction with Tishman Speyer that will enable the re-creation of its Brooklyn store on Fulton Street.

Macy's owns and operates the first four floors and lower level of its nine-story Fulton Street retail store which will undergo a three-year remodeling initiative. Tishman Speyer acquired the remaining portion of the store site and will pay Macy's $270 million in cash, of which the company has allocated $100 million to remodel its store.

As a result of the transaction, Macy's will record a gain of approximately $250 million, of which approximately $86 million will be recognized in its fourth fiscal quarter and the remaining will be booked in fiscal 2016 and 2017 with specific amounts dependent on the construction schedule.

Macy's has already received $68 million in cash from the sale in the fourth quarter of 2015 with the remaining to be received in fiscal 2016 and fiscal 2017.

"We are looking forward with great anticipation to the implementation phases of this project, which will transform Macy's Brooklyn store and significantly enhance the downtown Brooklyn community, which is emerging as a vibrant center for living, shopping, working and entertainment," said Terry J. Lundgren, chairman and chief executive officer of Macy's, Inc. "Moreover, this collaboration with Tishman Speyer is a great example of how our company can create significant additional value by strategically exploring the potential of our real estate assets while maintaining a robust store presence that is being upgraded to drive future growth."

Timing Change In Accounting For The Transaction

Macy's continued that given the timing change in accounting for the transaction, its earnings per diluted share for the full-year 2015 are now projected to be in the range of $3.54 to $3.59, excluding expenses related to cost efficiencies announced earlier in January and asset impairment charges associated primarily with spring 2016 store closings.

The company previously guided its earnings to a range of $3.85 to $3.90.

Macy's also lowered its fourth quarter earnings per share guidance to a range of $1.85 to $1.90 from a previous range of $2.18 to $2.23.