May’s Profit Drops on Rising Costs, Discounts

May Department Stores Co., which is being acquired by Federated Department Stores Inc., said fiscal first-quarter profit fell 46%, hurt by rising costs and markdowns on slower-selling apparel.

Net income declined to $41 million, or 13 cents a share, from $76 million, or 24 cents, a year earlier, St. Louis-based May said Tuesday. Sales in the quarter ended April 30 climbed 13.7% to $3.37 billion, helped by its July purchase of the Marshall Field’s chain.

Payroll and advertising costs rose faster than sales at May, which also owns Robinsons-May and Lord & Taylor. Interest expense increased $30 million, mostly for debt added to fund the $3.24-billion acquisition of Marshall Field’s. Sluggish sales of private-label brands in March and discounting last month trimmed profit.

Shares of May fell 17 cents to $37.03 on the New York Stock Exchange.

Same-store sales fell for the fourth consecutive quarter, slipping 5.1%. Sales dropped 10.8% in March.

Sales of private-label men’s and women’s apparel were weak, and the retailer offered discounts to keep its inventories current, Chief Executive John Dunham said.

The $11-billion acquisition by Cincinnati-based Federated, expected to be completed by October, will create the No. 2 U.S. department-store chain after Sears Holdings Corp.