Macy’s Inc.’s earnings in the second quarter declined before non-recurring items fell 16 percent, but easily topped Wall Street’s consensus estimate.

Macy’s, Inc. reported diluted earnings per share of 3 cents in the second quarter of 2016, ended July 30, 2016. Excluding asset impairment and other charges primarily related to upcoming store closings and non-cash retirement plan settlement charges of $255 million, or 51 cents per share, second-quarter earnings per share were 54 cents per share. The company’s earnings for the second quarter of 2016 compare with 64 cents per diluted share in the second quarter of 2015. Wall Street’s consensus estimate had been 45 cents.

The company also reaffirmed its previous sales and earnings guidance for full-year 2016.

Macy’s, Inc.’s earnings per share in the first half of 2016 were 41 cents (94 cents per share excluding asset impairment and other charges primarily related to upcoming store closings and non-cash settlement charges related to the company’s retirement plans, as described below), compared with earnings per diluted share of $1.19 in the same period last year.

“We are encouraged by the distinct improvement in our sales and earnings trend in the second quarter. Over the past few months, we have been saying that a setback is a setup for a comeback, and we now believe we are set up well to proceed to a comeback. Our sales strengthened month-by-month throughout the second quarter. This trend improvement gives us confidence in our plans for the back half of the year, and in our strategic planning for improvements to our business model going forward,” said Terry J. Lundgren, Macy’s chairman and CEO.

“A number of factors worked in our favor in the second quarter, including a normalized weather pattern, which contributed to a sales lift in our apparel business in particular. We also saw a smaller decrease in tourist spending during prime summer travel months, supported by strengthened promotional events designed to increase customer traffic and conversion. Macy’s first-ever ‘Black Friday in July’ event was a terrific success which drove record store and online sales for a mid-year period,” Lundgren said.

“We also are pleased that a number of sales-driving initiatives put in place in recent months are beginning to gain traction. These include additional investments in store staffing and visual presentation, the rollout of our enhanced fine jewelry departments, athletic/active apparel intensification, home store improvements and Last Act clearance strategy,” he added.

Sales

Sales in the second quarter of 2016 totaled $5.866 billion, a decrease of 3.9 percent, compared with sales of $6.104 billion in the same period last year. Comparable sales on an owned plus licensed basis were down by 2 percent in the second quarter. On an owned basis, second-quarter comparable sales declined by 2.6 percent. The difference between the year-over-year change in total and comparable sales largely resulted from the closing of 41 underperforming Macy’s stores in fiscal 2015.

For the year to date, Macy’s, Inc. sales totaled $11.637 billion, down 5.7 percent from total sales of $12.336 billion in the first half of 2015. Comparable sales on an owned plus licensed basis were down by 3.8 percent year-to-date in 2016. On an owned basis, year-to-date comparable sales declined by 4.4 percent.

In the second quarter, the company opened seven Bluemercury freestanding specialty stores. In the fall season, scheduled store openings include a Macy’s in Kapolei, HI; one Macy’s Backstage freestanding store in San Antonio; one Bloomingdale’s Outlet in Orange, CA and 10 additional Bluemercury freestanding specialty stores. In the second quarter, eight Macy’s Backstage and seven Bluemercury shops opened inside Macy’s stores, with another five in-store Macy’s Backstage and seven in-store Bluemercury shops planned for the fall season. In the third quarter, Macy’s is closing stores in North Hollywood, CA, and West Valley City, UT. In a separate news release issued today, the company announced plans to close approximately 100 full-line Macy’s locations, most of which will be closed in early 2017.

Operating Income

Macy’s, Inc.’s operating income totaled $117 million, or 2 percent of sales for the quarter ended July 30, 2016. Excluding asset impairment and other charges primarily related to upcoming store closings announced today of $249 million ($154 after tax, or 49 cents per share) and non-cash settlement charges related to the company’s retirement plans of $6 million ($3 million after tax, or 2 cents per share), operating income for the second quarter was $372 million or 6.4 percent of sales. This compares with operating income of $436 million or 7.1 percent of sales for the same period last year.

For the first half of 2016, Macy’s, Inc.’s operating income totaled $393 million or 3.4 percent of sales. Excluding asset impairment and other charges of $249 million ($154 million after tax, or 49 cents per share) and non-cash settlement charges related to the company’s retirement plans of $19 million ($12 million after tax, or 4 cents per share), operating income for the first half of 2016 was $661 million, or 5.7 percent of sales. This compares with operating income of $845 million, or 6.8 percent of sales, in the first half of 2015.

Cash Flow

Net cash provided by operating activities was $560 million in the first half of 2016, compared with $398 million in the first six months of last year. Net cash used by investing activities in the first half of 2016 was $338 million, compared with $615 million a year ago. Investing activities in the first six months of 2015 included the acquisition of Bluemercury. Net cash used by financing activities in the first six months of 2016 was $331 million, compared with $1.186 billion in the first half of 2015.

The company did not repurchase any shares of its common stock in the second quarter of 2016. Given first-quarter results, the company had decided to suspend its repurchase program but will consider resuming stock buybacks in the second half of 2016, assuming current sales trends continue. At July 30, 2016, the company has remaining authorization to repurchase up to approximately $1.9 billion of its common stock.

Looking Ahead

Based upon improved sales and earnings in the second quarter, the company remains confident in its previously provided guidance for full-year 2016.

Macy’s, Inc. expects full-year 2016 comparable sales on an owned plus licensed basis sales to decrease in the range of 3 percent to 4 percent, with comparable sales on an owned basis to be approximately 50 basis points lower. The company expects earnings per diluted share (excluding asset impairment charges and retirement settlement charges) in fiscal 2016 to be in a range of $3.15 to $3.40.