Macy's profit rises on solid sales Macy's Inc. reported a 20% increase in first-quarter profit even though cool temperatures and economic worries damped some shoppers' spending on spring clothes. The company, which also operates the upscale Bloomingdale's chain, is also raising its dividend to 25 cents from the current 20 cents. It announced an additional $1.5 billion in stock buybacks. Macy's, a standout among its peers throughout the economic recovery, is the first of the major retailers to report first-quarter results that should provide insight into Americans' mind-set heading into the summer season. The latest results show that although the job and housing markets are recovering, Macy's and others that cater to middle-income shoppers still face hurdles. "We are especially pleased with our first-quarter sales and earnings performance given the challenges we overcame in this period," Terry Lundgren, chairman, president and chief executive of Macy's, said in a statement. Like many clothing retailers, Macy's grappled with cool spring weather that lingered into April. But Lundgren also pointed to weak spending trends among the chain's most budget-conscious shoppers as well as among its higher-income Bloomingdale's customers. Macy's has been benefiting from its strategy of tailoring merchandise to local markets. The department store chain has also pulled in young shoppers by aligning with celebrities like Madonna and Jessica Simpson. But the company also said it would seek out new opportunities to get shoppers to spend. Analysts say that Macy's is benefiting from the troubles at rival J.C. Penney, which is set to announce its fifth straight quarter of sharp sales drops as it reels from strategies spearheaded by former CEO Ron Johnson, who was ousted in April. Under Johnson, Penney got rid of most sales, a move that turned off shoppers. Under new CEO Mike Ullman, who was also Johnson's predecessor, Penney is adding back sales and coupons, but it's not clear whether shoppers who have left will return. Penney is scheduled to announce first-quarter results late Thursday. Separately, Penney and Macy's are also locked in a legal battle over a partnership with home maven Martha Stewart. Macy's, which has had an exclusive merchandising contract with Stewart since 2006 in such products as bedding and bath items, sued Stewart and Penney after they signed a deal in December 2011 to develop mini Martha Stewart shops. After several weeks of heated testimony, a New York State Supreme Court judge is expected to hear closing arguments from the lawyers in a few weeks and will make his final decision after that. Despite Penney's woes, Macy's latest results show that although profit was up, revenue came in slightly short of analysts' estimates. Macy's said it earned $217 million, or 55 cents per share, in the quarter that ended May 4. That compares with $181 million, or 43 cents per share, a year earlier. Revenue rose 4% to $6.38 billion. Analysts expected earnings of 53 cents a share on revenue of $6.4 billion, according to FactSet. Revenue at stores open at least a year rose 3.8%. Analysts had expected an increase of 4.3%. Macy's expects revenue at stores open at least a year to rise 3.5% for the year. It also reiterated that it expects earnings per share for the full year to be in the range of $3.90 to $3.95. Analysts had expected $3.92 per share. The company said the dividend would be paid July 1 to shareholders of record at the close of business on June 14. Macy's shares rose $1.18, or 2.5%, to $48.57.