Macy's Keeps Up Momentum

Macy’s Inc. ( M - Analyst Report ) , one of the leading department store retailers in the U.S., posted strong comparable-store sales (comps) for the four-week period ended July 28, 2012, much better than analysts' expectations. The increase in comps was attributable to continued strength in its online business.

Same-store sales improved 4.1% year over year for the month of July. The company stated that total sales of $1.69 billion for the month of July 2012 reflected an increase of 5.1% from $1.61 billion in the comparable prior-year period.

In spite of the macro-economic headwinds and a temporary suspension in sales due to restoration of flagship stores in New York City, the company continued to perform well in the first half of 2012, reflecting healthy sales in the month of July. Moreover, Macy’s met management’s expectations for the spring season.

Year-to-date, Macy’s sales jumped 3.7% to $12.3 billion compared with $11.8 billion in the same period last year. Macy’s same-store sales also increased 3.7% year-to-date.

Online sales, which include sales from macys.com and bloomingdales.com, continued to grow at a rapid pace, surging 35.1% in July. On a year-to-date basis, online sales shot up 34.8% from the comparable period last year. The company seeks to expand both Macy's and Bloomingdale's brands online.

Macy’s total sales grew 3% to $6.1 billion in the second-quarter 2012 from $5.9 billion in the prior-year period, while same-store sales climbed 3%. Online sales during the quarter soared 36.1%. The company currently operates approximately 840 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

To Conclude

Macy’s department stores sell a wide range of merchandise. Its products include men’s, women’s, and children’s apparel. It also deals with accessories, cosmetics, home furnishings and other consumer goods.

The company has been taking a number of initiatives in order to increase its sales, profitability and cash flows. These steps include integration of operations, consolidation of divisions as well as developing e-commerce business and online order fulfillment centers.

We remain optimistic about the company’s customer-centric localization initiative called “My Macy’s.” The program aims at improving comparable-store sales and reducing operating expenses, with stores and merchandise assortments focusing on local customer needs and preferences.

However, the company’s expansion in regions where it already serves could cannibalize its sales performance and bring down traffic counts at its existing stores in these areas. Consequently, this may have a negative impact on the company’s overall performance.

Therefore, Macy’s, which competes with J. C. Penney Company Inc. ( JCP - Analyst Report ) , Dillard’s Inc. ( DDS - Analyst Report ) and Saks Incorporated ( SKS - Analyst Report ) , carries a Zacks #3 Rank that translates into a short-term Hold rating. Moreover, we have a long-term Neutral recommendation on the stock.