Macy’s Inc.reported first quarter 2018 earnings per diluted share of 45 cents, or 48 cents excluding impairment and other costs. This compares to 26 cents per share in the first quarter of 2017 for both reported and adjusted diluted earnings per share.

Also excluding asset sale gains, earnings per diluted share attributable to Macy’s, Inc. were 42 cents in the first quarter of 2018. This compares to 12 cents per share in the first quarter of 2017 and ahead of 37 cents expected on average by Wall Street.

The company also reported comparable sales on an owned basis that were up 3.9 percent in the first quarter of 2018 compared to the first quarter of 2017. On an owned plus licensed basis, comparable sales were up 4.2 percent for the first quarter of 2018. Wall Street was expecting a comp gain of 1.4 percent.

“Macy’s Inc.’s results for the first quarter of 2018 reflect continuing momentum in the business. We exceeded our expectations and saw strong performance across all three brands—Macy’s, Bloomingdale’s and Bluemercury—as well as across all geographic regions and families of business. We are maintaining a healthy inventory position, which helped us deliver improved gross margin,” said Jeff Gennette, Macy’s, Inc. chairman and chief executive officer. “The winning formula for Macy’s, Inc. is a healthy brick & mortar business, robust e-commerce and a great mobile experience. While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business. Our best customer is responding well to the improvements we’ve made to her experience in our stores, on .com and through the Macy’s app.”

“Our first quarter performance reflects solid execution of our North Star Strategy, including merchandising and marketing activities. We also saw continued healthy consumer spending and significant improvements in international tourism. Taken together, these positive factors give us confidence to raise both our sales and earnings guidance for the fiscal year,” continued Gennette. “Heading into the second quarter, we are intensely focused on laying the foundation for our 2018 strategic initiatives to support improved performance in the back half of the year.”

Sales

Net sales in the first quarter of 2018 totaled $5.541 billion, an increase of 3.6 percent, compared with sales of $5.350 billion in the first quarter of 2017. Comparable sales on an owned basis were up 3.9 percent in the first quarter and up 4.2 percent on an owned plus licensed basis.

The company estimates that comparable sales in the first quarter of 2018 benefited approximately 250 basis points from the shift of Friends and Family from the second quarter to the first. Excluding this, the company estimates that comparable sales were up 1.7 percent on an owned plus licensed basis.

Operating Income and Net Income

Macy’s, Inc.’s operating income for the first quarter of 2018 totaled $238 million, or 4.3 percent of sales, compared to $219 million, or 4.1 percent of sales, for the first quarter of 2017. Operating income for the first quarter of 2018 totaled $257 million, or 4.6 percent of sales, excluding impairment and other costs of $19 million, which primarily relate to the wind-down of Macy’s China Limited as discussed below. The company anticipates recognizing additional charges of approximately $10 million related to the wind-down over the course of fiscal 2018. There were no impairment and other costs in the first quarter of 2017.

Net income attributable to Macy’s, Inc. shareholders for the first quarter of 2018 totaled $139 million, or 2.5 percent of sales, compared to $78 million, or 1.5 percent of sales, for the first quarter of 2017. Net income for the first quarter of 2018 totaled $149 million, or 2.7 percent of sales, excluding impairment and other costs. This compares to $80 million, or 1.5 percent of sales, in the first quarter of 2017, excluding premiums on the early retirement of debt. Also excluding asset sale gains, net income for the first quarter of 2018 totaled $131 million, or 2.4 percent of sales, compared to $38 million, or 0.7 percent of sales, in the first quarter of 2017.

Cash Flow

Net cash provided by operating activities was $322 million in the first quarter of 2018, compared to $237 million in the first quarter last year. Net cash used by investing activities in the first quarter of 2018 was $156 million, compared with $60 million a year ago. Net cash used by financing activities in the first quarter of 2018 was $99 million, compared with $273 million last year.

China Update

Macy’s, Inc. has set a new approach to its business in China. The company has come to a mutual agreement to end the joint venture with Fung Retailing Limited. Macy’s will remain active on Alibaba’s e-commerce platform TMall, as well as social media channels. The Macy’s e-commerce team in San Francisco will manage the ongoing China business with operational support from Fung Omni in Shanghai.

Looking Ahead: Raising Earnings and Sales Guidance

Macy’s, Inc. is updating its guidance for fiscal 2018. The company now expects adjusted earnings per diluted share of $3.75 to $3.95 in fiscal 2018, excluding anticipated settlement charges related to the company’s defined benefit plans as well as impairment and other costs. This reflects an increase of 20 cents compared to the prior guidance. Total sales are expected to range from a 1 percent decline to a .5 percent increase in fiscal 2018. Comparable sales on an owned plus licensed basis are expected to increase between 1 and 2 percent. Comparable sales on an owned basis are expected to be 20-30 basis points below comparable sales on an owned plus licensed basis.

Total sales guidance is provided on a 52-week basis in 2018 compared to a 53-week basis in 2017. Comparable sales guidance is provided on a 52-week basis in both 2018 and 2017.

First quarter 2018 results, first quarter 2017 results and guidance for fiscal 2018 reflect the new accounting standards related to revenue recognition and retirement benefits. Macy’s, Inc. has recast its quarterly income statements and balance sheets for 2016 and 2017 to reflect adoption of these new standards.