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The impact of challenging retail landscape, stiff competition from online retailers and waning store traffic was clearly evident in the Macy’s, Inc.’s (M - Free Report) holiday sales results that came below expectations. The lackluster performance compelled management to trim its fiscal 2016 earnings projection. All these factors were enough to punish the stock, as it plunged over 10% during after-market trading hours on Jan 4. Even the announcement of strategic measures to streamline operations failed to cushion the stock.
Comparable sales on an owned plus licensed basis decreased 2.1% during November and December period combined, while on an owned basis, comparable sales fell 2.7%.
Macy’s informed that digital business remained robust and registered double-digit growth at both macys.com and bloomingdales.com. However, the changing consumer behavior hurt store sales. The company’s apparel business showcased strength – predominantly active and cold-weather merchandise. Fine jewelry, furniture and bedding categories also marked strong sales but softness prevailed at handbags and watches.
As a result of dismal holiday sales, Macy’s now envisions fiscal 2016 earnings in the band of $2.95 to $3.10, down from a range of $3.15 to $3.40, forecasted earlier. Management expects comparable sales on an owned plus licensed basis to come in at the lower end of the previously announced sales guidance of 2.5% to 3% decline. On an owned basis, comparable sales are expected to be roughly 50 basis points below.
Evidently, after disappointing holiday sales results Macy’s will struggle to find place in investors’ good books, and management is also not unaware of this fact. The company in a bid to calm investors’ jitters, announced slew of measures revolving around stores closures, cost containment, real estate strategy and investment in omnichannel capabilities.
The company is closing 68 Macy’s store out of 730 stores, as a part of its planned closure of about 100 stores announced in Aug 2016. Further, it will realign operations and focus on curtailing costs. Management said that these measures will result in annual savings of about $550 million, beginning in 2017, and would allow the company to invest an additional $250 million in enhancing digital business, store-related growth initiatives, Bluemercury, Macy’s Backstage and China.
Moreover, Macy’s pointed that store closures will lower its 2017 sales by approximately $575 million. Beside this, management also said that four new Macy’s and Bloomingdale’s stores are currently planned or are under construction. Additionally, new Macy’s and Bloomingdale’s outlets are expected to be launched in Abu Dhabi, and one Bloomingdale’s store in Kuwait., The company will also undertake massive restructuring of the organization that may result in headcount reduction of 6,200.
Although heading in the right direction, it is still to be seen how these efforts will help lift the performance of this Zacks Rank #3 (Hold) company in the near future, whose shares have increased 6.7% in the past six months, compared with the Retail-Regional Department Stores industry’s gain of 10.6%.
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
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Macy's (M) Stock Falls on Dismal Holiday Sales & View Cut
The impact of challenging retail landscape, stiff competition from online retailers and waning store traffic was clearly evident in the Macy’s, Inc.’s (M - Free Report) holiday sales results that came below expectations. The lackluster performance compelled management to trim its fiscal 2016 earnings projection. All these factors were enough to punish the stock, as it plunged over 10% during after-market trading hours on Jan 4. Even the announcement of strategic measures to streamline operations failed to cushion the stock.
Comparable sales on an owned plus licensed basis decreased 2.1% during November and December period combined, while on an owned basis, comparable sales fell 2.7%.
Macy’s informed that digital business remained robust and registered double-digit growth at both macys.com and bloomingdales.com. However, the changing consumer behavior hurt store sales. The company’s apparel business showcased strength – predominantly active and cold-weather merchandise. Fine jewelry, furniture and bedding categories also marked strong sales but softness prevailed at handbags and watches.
As a result of dismal holiday sales, Macy’s now envisions fiscal 2016 earnings in the band of $2.95 to $3.10, down from a range of $3.15 to $3.40, forecasted earlier. Management expects comparable sales on an owned plus licensed basis to come in at the lower end of the previously announced sales guidance of 2.5% to 3% decline. On an owned basis, comparable sales are expected to be roughly 50 basis points below.
Evidently, after disappointing holiday sales results Macy’s will struggle to find place in investors’ good books, and management is also not unaware of this fact. The company in a bid to calm investors’ jitters, announced slew of measures revolving around stores closures, cost containment, real estate strategy and investment in omnichannel capabilities.
The company is closing 68 Macy’s store out of 730 stores, as a part of its planned closure of about 100 stores announced in Aug 2016. Further, it will realign operations and focus on curtailing costs. Management said that these measures will result in annual savings of about $550 million, beginning in 2017, and would allow the company to invest an additional $250 million in enhancing digital business, store-related growth initiatives, Bluemercury, Macy’s Backstage and China.
Moreover, Macy’s pointed that store closures will lower its 2017 sales by approximately $575 million. Beside this, management also said that four new Macy’s and Bloomingdale’s stores are currently planned or are under construction. Additionally, new Macy’s and Bloomingdale’s outlets are expected to be launched in Abu Dhabi, and one Bloomingdale’s store in Kuwait., The company will also undertake massive restructuring of the organization that may result in headcount reduction of 6,200.
Although heading in the right direction, it is still to be seen how these efforts will help lift the performance of this Zacks Rank #3 (Hold) company in the near future, whose shares have increased 6.7% in the past six months, compared with the Retail-Regional Department Stores industry’s gain of 10.6%.
Stocks to Consider
Better-ranked stocks in the retail sector include Best Buy Co., Inc. (BBY - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Burlington Stores, Inc. (BURL - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
Zacks’ Best Private Investment Idea
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>