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Macy's (M) Exhibits Operational Strength: Time to Invest?
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Macy's, Inc. (M - Free Report) looks a pretty promising portfolio addition at the moment based on its sound fundamentals, operational strength and a track record of better-than-expected bottom-line results. The stock carries a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 8.5% with a VGM Score of “A”. Let’s delve deeper and find out the underlying factors behind this performance.
Growth Drivers
We believe Macy’s sustained focus on price optimization, inventory management, merchandise planning, and private label offering are the primary catalysts, facilitating in meeting customer-oriented demand. In an attempt to improve sales, profitability and cash flows, it has been taking steps such as integration of operations as well as developing e-commerce business and online order fulfillment centers. Macy’s Backstage off-price business, the launch of Plenti loyalty rewards program, the introduction of Thalia Sodi private brand, and expansion of Bluemercury also bode well.
Restructuring Plan
Macy's has adopted an extensive restructuring program involving store closures and layoffs. The company is synchronizing the merchandising and marketing operations of both its stores and online portal. As part of its store rationalization program, management plans to shut down nearly 100 Macy’s full-line stores to focus on better performing locations. The company plans to close most of the stores in the early part of 2017. It plans to divert the savings from these restructuring activities to further develop its omni-channel capacities, build superior security infrastructure and enhance direct-to-consumer fulfillment capacity in all full-line Macy’s and Bloomingdale’s stores, and at fulfillment centers.
Widening Operations
Macy’s has been widening its operations via deals and collaborations to increase its customer base. It entered into a joint venture with Fung Retailing Limited – one of the leading retailers in Greater China – in an attempt to tap retailing opportunities in the fast-growing Chinese markets. The company also entered into a deal with Luxottica Group – the designer, manufacturer and distributor of fashion, luxury and sports eyewear – to open LensCrafters licensed departments in Macy’s outlets.
From the aforementioned factors, it is quite apparent that Macy’s is leaving no stone unturned to put itself on the growth trajectory and enhance its top- and bottom-line performance. Analysts covering the stock are also raising their estimates, which clearly indicate their optimism about Macy’s performance in the near term.
This department store retailer has also been witnessing an uptrend in the Zacks Consensus Estimate following better-than-expected second-quarter fiscal 2016 results. This was the fourth straight quarter in which the company posted a positive earnings surprise.
Over the past 60 days, the Zacks Consensus Estimate of $3.37 and $3.49 for fiscal 2016 and fiscal 2017 has increased 12 cents and 11 cents, respectively. While in the past 30 days, the same has increased 4 cents and 1 cent, respectively.
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Macy's (M) Exhibits Operational Strength: Time to Invest?
Macy's, Inc. (M - Free Report) looks a pretty promising portfolio addition at the moment based on its sound fundamentals, operational strength and a track record of better-than-expected bottom-line results. The stock carries a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 8.5% with a VGM Score of “A”. Let’s delve deeper and find out the underlying factors behind this performance.
Growth Drivers
We believe Macy’s sustained focus on price optimization, inventory management, merchandise planning, and private label offering are the primary catalysts, facilitating in meeting customer-oriented demand. In an attempt to improve sales, profitability and cash flows, it has been taking steps such as integration of operations as well as developing e-commerce business and online order fulfillment centers. Macy’s Backstage off-price business, the launch of Plenti loyalty rewards program, the introduction of Thalia Sodi private brand, and expansion of Bluemercury also bode well.
Restructuring Plan
Macy's has adopted an extensive restructuring program involving store closures and layoffs. The company is synchronizing the merchandising and marketing operations of both its stores and online portal. As part of its store rationalization program, management plans to shut down nearly 100 Macy’s full-line stores to focus on better performing locations. The company plans to close most of the stores in the early part of 2017. It plans to divert the savings from these restructuring activities to further develop its omni-channel capacities, build superior security infrastructure and enhance direct-to-consumer fulfillment capacity in all full-line Macy’s and Bloomingdale’s stores, and at fulfillment centers.
Widening Operations
Macy’s has been widening its operations via deals and collaborations to increase its customer base. It entered into a joint venture with Fung Retailing Limited – one of the leading retailers in Greater China – in an attempt to tap retailing opportunities in the fast-growing Chinese markets. The company also entered into a deal with Luxottica Group – the designer, manufacturer and distributor of fashion, luxury and sports eyewear – to open LensCrafters licensed departments in Macy’s outlets.
MACYS INC Price, Consensus and EPS Surprise
MACYS INC Price, Consensus and EPS Surprise | MACYS INC Quote
Bottom Line
From the aforementioned factors, it is quite apparent that Macy’s is leaving no stone unturned to put itself on the growth trajectory and enhance its top- and bottom-line performance. Analysts covering the stock are also raising their estimates, which clearly indicate their optimism about Macy’s performance in the near term.
This department store retailer has also been witnessing an uptrend in the Zacks Consensus Estimate following better-than-expected second-quarter fiscal 2016 results. This was the fourth straight quarter in which the company posted a positive earnings surprise.
Over the past 60 days, the Zacks Consensus Estimate of $3.37 and $3.49 for fiscal 2016 and fiscal 2017 has increased 12 cents and 11 cents, respectively. While in the past 30 days, the same has increased 4 cents and 1 cent, respectively.
Other Stocks to Consider
Investors may also consider other favorably ranked stocks such as The Children's Place, Inc. (PLCE - Free Report) , Nordstrom Inc. (JWN - Free Report) and Urban Outfitters Inc. (URBN - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>