E Macy's - Has The Party Started?

Macy's (M) share price tanked 7% after a yet another beat and raise quarter. The stock has dropped about 30% from its Sep highs and currently trade around $30 mark. While the fall is also inline with the decline in the broader markets, the retailer's challenge stand firm.

A closer look at Q-3 results

(M) delivered a 3.1% comp sales growth on an owned store basis in the quarter beating the street estimates also due to a lower base in the previous quarter. As per the management's commentary, the comps would have fared better had they adjusted the calendar in this quarter and would have fared slightly worse in the previous half. October comps in Q3 was strong owing to the weather, however, the comps were positive in both the previous months. The company delivered an EPS beat of 13c entirely driven by credit card income and real estate, outside of the core operations. However, the core retail operating income came at -$77m ($147m operating income + $3m in restructuring - $42m in asset sale gains - $185m in credit card revenues) which is discouraging. Even including the asset sale gains and credit card revenues, the operating margin was roughly flat 2.8% vs 2.9% YoY. Although the company improved the guidance for the year and posted a better than expected comp, the EBIT dollars remain a concern.

Holiday Cheer

According to Mastercard SpendingPulse, Retail had the best shopping season during the holiday season gone by in 6 years. Sales from Nov. 1 through Christmas Eve were up 5.1 percent to more than $850 billion with online sales growing 19.1% in the same period. Consumer confidence remained strong with apparel and home improvement being the biggest beneficiaries (both up 8% and 9% respectively). While department sales fared poorly, (M) continued to grow, according to Steve Sadove, former CEO of SAKS and advisor of Mastercard currently. While this looks promising, it remains to be seen how the department store fares in a tougher comp period (4Q 17 was the first positive comp sales growth posted by the company through 2015).

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Beating Buffett 3 weeks ago Member's comment

What other stocks do you like?

Andrew Cioffi 1 month ago Member's comment

Good stuff, looking forward to more by you.

Dick Kaplan 1 month ago Member's comment

Any updated thoughts on #Macy's? $M