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Macy's (M) is No Longer in Investors' Good Books: Here's Why
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Macy’s Inc. (M - Free Report) is struggling to find a place in investors’ portfolio. The stock, which carries a Zacks Rank #5 (Strong Sell), has lost approximately 26.6% over the past three months. So, what led this Cincinnati, OH-based company to fall out of favor? Let’s find out.
Top & Bottom Lines Continue to Decline
Macy’s dwindling top- and bottom-line results remain the primary concern for investors. A look at the company’s performance in fiscal 2015 unveils that net sales declined 0.7%, 2.6%, 5.2% and 5.3% in the first, second, third and fourth quarters, respectively. Maintaining the same chronological order, we note that earnings per share fell 6.7%, 20%, 8.2% and 14.3%, respectively. In the first quarter of fiscal 2016, net sales decreased 7.4%, while earnings per share plunged 28.6%.
Macy's pointed out that persistent softness in consumer spending levels for apparel and other related categories, lower spending by international tourists due to a stronger dollar and sluggishness seen in some center core categories, dampened performance. These factors further compelled management to cut its forecast for the year.
Dismal Q1 Performance Led to Guidance Cut
The disappointing first-quarter fiscal 2016 performance forced management to trim its outlook for the year. Macy’s now projects comparable sales (comps) on an owned plus licensed basis to decline in the band of 3−4% during fiscal 2016, while on an owned basis, comps are expected to contract roughly 50 basis points. Earlier, the company had projected comps on an owned plus licensed basis to decline approximately 1%. Management now envisions fiscal 2016 earnings between $3.15 and $3.40 per share, down from a range of $3.80−$3.90 guided earlier. Macy’s anticipates gross margin rate to be approximately flat for the full year.
Estimates Moving Southward
Following a subdued performance and bleak outlook, the Zacks Consensus Estimate has been witnessing a downtrend. Analysts polled by Zacks are not convinced about the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate of $3.25 and $3.38 for fiscal 2016 and fiscal 2017 has decreased 58 cents. Moreover, the Zacks Consensus Estimate for the second quarter has dropped 26 cents to 40 cents over the same time frame.
With Macy's share price tumbling and estimates witnessing downward revisions, it would not be prudent to keep the stock in your portfolio, at least for the time being.
Stocks that Warrant a Look
Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both holding a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Macy's (M) is No Longer in Investors' Good Books: Here's Why
Macy’s Inc. (M - Free Report) is struggling to find a place in investors’ portfolio. The stock, which carries a Zacks Rank #5 (Strong Sell), has lost approximately 26.6% over the past three months. So, what led this Cincinnati, OH-based company to fall out of favor? Let’s find out.
Top & Bottom Lines Continue to Decline
Macy’s dwindling top- and bottom-line results remain the primary concern for investors. A look at the company’s performance in fiscal 2015 unveils that net sales declined 0.7%, 2.6%, 5.2% and 5.3% in the first, second, third and fourth quarters, respectively. Maintaining the same chronological order, we note that earnings per share fell 6.7%, 20%, 8.2% and 14.3%, respectively. In the first quarter of fiscal 2016, net sales decreased 7.4%, while earnings per share plunged 28.6%.
Macy's pointed out that persistent softness in consumer spending levels for apparel and other related categories, lower spending by international tourists due to a stronger dollar and sluggishness seen in some center core categories, dampened performance. These factors further compelled management to cut its forecast for the year.
Dismal Q1 Performance Led to Guidance Cut
The disappointing first-quarter fiscal 2016 performance forced management to trim its outlook for the year. Macy’s now projects comparable sales (comps) on an owned plus licensed basis to decline in the band of 3−4% during fiscal 2016, while on an owned basis, comps are expected to contract roughly 50 basis points. Earlier, the company had projected comps on an owned plus licensed basis to decline approximately 1%. Management now envisions fiscal 2016 earnings between $3.15 and $3.40 per share, down from a range of $3.80−$3.90 guided earlier. Macy’s anticipates gross margin rate to be approximately flat for the full year.
Estimates Moving Southward
Following a subdued performance and bleak outlook, the Zacks Consensus Estimate has been witnessing a downtrend. Analysts polled by Zacks are not convinced about the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate of $3.25 and $3.38 for fiscal 2016 and fiscal 2017 has decreased 58 cents. Moreover, the Zacks Consensus Estimate for the second quarter has dropped 26 cents to 40 cents over the same time frame.
MACYS INC Price and Consensus
MACYS INC Price and Consensus | MACYS INC Quote
With Macy's share price tumbling and estimates witnessing downward revisions, it would not be prudent to keep the stock in your portfolio, at least for the time being.
Stocks that Warrant a Look
Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both holding a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>