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Macy's (M) Q3 Earnings: Omnichannel Efforts to Play Key Role

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Macy's, Inc. (M - Free Report) is scheduled to report third-quarter fiscal 2018 results on Nov 14, before the opening bell. In the last reported quarter, this department store retailer delivered a positive earnings surprise of 20.4%. The company’s bottom-line has also outperformed the Zacks Consensus Estimate by an average of 19.9% in the trailing four quarters.

How Are Estimates Faring?

The Zacks Consensus Estimate for the quarter under review is pegged at 13 cents, which exhibits a sharp decline from 23 cents recorded in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in 30 days. Analysts polled by Zacks now project revenues of $5.44 billion, reflecting year-over-year increase of roughly 3%. In the last reported quarter, the company’s net sales declined 1.1%.

Factors at Play

Macy's sustained focus on price optimization, inventory management, merchandise planning and private label offering are the primary catalysts aiding the company’s performance. In an attempt to increase sales, profitability and cash flows, the company has been taking steps such as integration of operations, developing omni-channel capabilities and online order fulfillment centers.

Management has undertaken initiatives — Macy’s Backstage off-price business, the launch of Star Rewards program, Growth50 stores, and expansion of Bluemercury — to keep itself on growth trajectory. The company’s “Buy Online Pickup in Store” and "Buy Online Ship to Store" initiatives are gaining traction.

Macy’s acquired STORY, a concept store, to enhance the in-store customer experience. The company has added a new feature to its mobile app called Mobile Checkout, which enables customers to scan bar codes of items and pay via smartphones. The company has taken a minority stake in b8ta, a technology retailer that allow customers to try, buy and learn about new tech products. The investment is seen as part to enhance customer shopping experience at its The Market @ Macy's, a store-within-a-store retail concept.

The aforementioned endeavors are viewed as steps to safeguard against industry challenges and stiff competition from online retailers. Management expects selling, general and administrative expenses to increase on account of strategic investments. However, any significant increase in the same may hurt margins and in turn the bottom line.

Macy's, Inc. Price, Consensus and EPS Surprise

 

Macy's, Inc. Price, Consensus and EPS Surprise | Macy's, Inc. Quote

What the Zacks Model Unveils

Our proven model shows that Macy’s is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Macy’s has a Zacks Rank #1 and an Earnings ESP of +20.00%. This makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Burlington Stores (BURL - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #2.

Target (TGT - Free Report) has an Earnings ESP of +1.41% and a Zacks Rank #2.

Costco (COST - Free Report) has an Earnings ESP of +3.05% and a Zacks Rank #3.

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