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On the Call: Macy's CFO discusses online business

NEW YORK (AP) -- Macy's Inc. said Wednesday that first-quarter profits rose a better-than-expected 38 percent as it continued to benefit from tailoring its merchandise to local markets. But the operator of the Macy's and Bloomingdale's department store chains kept its annual profit guidance intact, sending shares down.

During a conference call with investors, Chief Financial Officer Karen Hoguet discussed initiatives in Macy's online business, which now accounts for 7 percent of the company's total business. Online sales rose 33.7 percent during the first quarter.

QUESTION: What are some of the initiatives Macy's is embracing to meld it online business with its physical stores?

ANSWER: We are seeing more and more opportunity to satisfy demand from customers when they're in the store with inventory that comes from other locations and from our direct-to-customer distribution centers.

We are also beginning to be able to satisfy online demand with store inventory when the distribution center runs out of a particular item. It is really very exciting to watch. We now have over 80 stores equipped to fulfill orders from other stores or from online demand, and by the holiday season, we will have over 290 store fulfillment locations. We think the sales potential from this omni-channel approach is enormous.

In addition, over time, it should enable us to also improve the productivity of our inventory as well as our store square footage. We have barely scratched the surface here, and we are very optimistic about the possibilities.