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Why Did Macy's (M) Stock Drop After Crushing Earnings?
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Shares of Macy’s (M - Free Report) fell a significant 16% for the day after reporting its earnings Wednesday before the bell. The massive drop may be a bit surprising as the results for the company’s Q2 weren’t overwhelmingly negative.
Macy’s was able to post adjusted earnings of $0.59 per share, beating the Zacks Consensus earnings estimate of $0.49. Further, the retailer provided strong guidance and now expects full fiscal 2018 adjusted EPS of $3.95 to $4.15, a 20 cent increase from its previous guidance and ahead of the current Zacks Consensus Estimate of a $3.88.
Regarding the second-quarter results, Macy’s management appeared to be optimistic in the press release. CEO Jeff Gennette stated, “Macy’s Inc. delivered strong performance in the first half of the year, and we are pleased to report our third consecutive quarter of comparable sales growth,” and added that strategic initiatives are “gaining traction.”
However, key misses in Macy’s second-quarter—and general investor apprehension—overshadowed the earnings beat and increased guidance. The main concern is the sales numbers for the company. Net sales totaled $5.57 billion in the second-quarter, missing the Zacks Consensus estimate of $5.62 billion. The figure represents a decline of 1.1% from sales in the same quarter one year ago.
To add to the weak sales numbers, investors are likely concerned with Macy’s ability to succeed in a constantly evolving and highly competitive retail landscape. Of course, e-commerce giant Amazon (AMZN - Free Report) poses a major threat, and Macy’s also has to deal with traditional brick-and-mortar rivals, like Nordstrom (JWN - Free Report) and JCPenney .
As Gennette mentioned in the post-earnings press release, Macy’s has been launching initiatives to remain a leader in retail. Most are tailored towards digitalization and improving customer experience in order to keep up with consumer trends.
An example is the company’s “Growth 50” plan, which focuses on expanding in-store technology, such as mobile checkout. In June, Macy’s also took a minority stake in b8ta, a technology retailer that allows customers to try and learn about new tech products.
These moves seemed to be working, as Macy’s stock had increased nearly 66% this year to do date, prior to the earnings report. Moreover, the sales miss for this quarter may be attributed to the company moving its Friends and Family event to the first-quarter, subduing comparable sales performance for this quarter.
But if today’s drop is any indication, Macy’s still needs to do more to prove to investors that it can thrive in today’s retail industry.
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Why Did Macy's (M) Stock Drop After Crushing Earnings?
Shares of Macy’s (M - Free Report) fell a significant 16% for the day after reporting its earnings Wednesday before the bell. The massive drop may be a bit surprising as the results for the company’s Q2 weren’t overwhelmingly negative.
Macy’s was able to post adjusted earnings of $0.59 per share, beating the Zacks Consensus earnings estimate of $0.49. Further, the retailer provided strong guidance and now expects full fiscal 2018 adjusted EPS of $3.95 to $4.15, a 20 cent increase from its previous guidance and ahead of the current Zacks Consensus Estimate of a $3.88.
Regarding the second-quarter results, Macy’s management appeared to be optimistic in the press release. CEO Jeff Gennette stated, “Macy’s Inc. delivered strong performance in the first half of the year, and we are pleased to report our third consecutive quarter of comparable sales growth,” and added that strategic initiatives are “gaining traction.”
However, key misses in Macy’s second-quarter—and general investor apprehension—overshadowed the earnings beat and increased guidance. The main concern is the sales numbers for the company. Net sales totaled $5.57 billion in the second-quarter, missing the Zacks Consensus estimate of $5.62 billion. The figure represents a decline of 1.1% from sales in the same quarter one year ago.
To add to the weak sales numbers, investors are likely concerned with Macy’s ability to succeed in a constantly evolving and highly competitive retail landscape. Of course, e-commerce giant Amazon (AMZN - Free Report) poses a major threat, and Macy’s also has to deal with traditional brick-and-mortar rivals, like Nordstrom (JWN - Free Report) and JCPenney .
As Gennette mentioned in the post-earnings press release, Macy’s has been launching initiatives to remain a leader in retail. Most are tailored towards digitalization and improving customer experience in order to keep up with consumer trends.
An example is the company’s “Growth 50” plan, which focuses on expanding in-store technology, such as mobile checkout. In June, Macy’s also took a minority stake in b8ta, a technology retailer that allows customers to try and learn about new tech products.
These moves seemed to be working, as Macy’s stock had increased nearly 66% this year to do date, prior to the earnings report. Moreover, the sales miss for this quarter may be attributed to the company moving its Friends and Family event to the first-quarter, subduing comparable sales performance for this quarter.
But if today’s drop is any indication, Macy’s still needs to do more to prove to investors that it can thrive in today’s retail industry.
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Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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