Shares of Macy's, Inc. (M - Free Report) were down to a 52-week low of $29.66 on Jan 13, 2017, on dismal holiday sales. The company trimmed its fiscal 2016 earnings projection. Even the announcement of strategic measures to streamline its operations failed to cushion the stock. Since these announcements, the stock fell 16.6%. Also, this Zacks Rank #3 (Hold) company’s dwindling top- and bottom-line performance have been hurting the stock for quite some time now, further weighing upon investors’ sentiments.
Let’s Delve Deeper
Macy's holiday sales results came below expectations due to the impact of a tough retail landscape, stiff competition from online retailers and waning store traffic. Comparable sales (comps), on an owned plus licensed basis, dipped 2.1% during the combined period of November and December, while on an owned basis, comps fell 2.7%. Further, the changing consumer behavior hurt store sales.
However, what came as a respite was that the company’s digital business remained robust and also registered double-digit growth at both macys.com and bloomingdales.com. In addition, its apparel business showcased strength in predominantly active and cold-weather merchandise. Fine jewelry, furniture and bedding categories also marked strong sales, but softness prevailed at handbags and watches.
Following the lackluster performance, management cut its fiscal 2016 earnings guidance. Macy’s now envisions fiscal 2016 earnings in the band of $2.95–$3.10, down from the range of $3.15–$3.40, projected earlier. Moreover, it expects comps, on an owned plus licensed basis, to come in at the lower end of the previously announced sales guidance of 2.5–3% decline. On an owned basis, comps are expected to be down roughly 50 basis points.
Consequently, estimate revisions have moved south over the past 30 days. In the said time frame, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has decreased 20 cents and 34 cents to $3.07 and $3.14, respectively.
Further, we noted that in fiscal 2016 net sales dipped 7.4%, 3.9% and 4.2% in the first, second and third quarters, respectively, while earnings per share declined 28.6%, 15.6% and 69.6% during the respective quarters.
However, 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 omni-channel capabilities. Going forward, 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.
The company stated that store closures will lower its 2017 sales by approximately $575 million.
Nonetheless, Macy’s focus on price optimization, inventory management, merchandise planning and private label offering are the primary growth catalysts. Also, it has been widening its operations via deals and collaborations in order to fortify its customer base.
Bottom Line
We observed that Macy’s shares have fallen 15.2% in the past six months, compared with the Retail-Regional Department Stores industry’s decline of 10.8%. Therefore, only time will tell whether these strategic endeavors will bring the company back on its growth trajectory.
Key Picks
Better-ranked stocks in the broader retail sector include The Children's Place, Inc. (PLCE - Free Report) , Christopher & Banks Corporation and Tilly's, Inc. (TLYS - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged a whopping 61.5% in the past one year.
Christopher & Banks, with a long-term earnings growth rate of 15%, has jumped 53.3% in the past one year.
Tilly's, with a long-term earnings growth rate of 13%, has skyrocketed 120.9% in the past six months.
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Shares of Macy's, Inc. (M - Free Report) were down to a 52-week low of $29.66 on Jan 13, 2017, on dismal holiday sales. The company trimmed its fiscal 2016 earnings projection. Even the announcement of strategic measures to streamline its operations failed to cushion the stock. Since these announcements, the stock fell 16.6%. Also, this Zacks Rank #3 (Hold) company’s dwindling top- and bottom-line performance have been hurting the stock for quite some time now, further weighing upon investors’ sentiments.
Let’s Delve Deeper
Macy's holiday sales results came below expectations due to the impact of a tough retail landscape, stiff competition from online retailers and waning store traffic. Comparable sales (comps), on an owned plus licensed basis, dipped 2.1% during the combined period of November and December, while on an owned basis, comps fell 2.7%. Further, the changing consumer behavior hurt store sales.
However, what came as a respite was that the company’s digital business remained robust and also registered double-digit growth at both macys.com and bloomingdales.com. In addition, its apparel business showcased strength in predominantly active and cold-weather merchandise. Fine jewelry, furniture and bedding categories also marked strong sales, but softness prevailed at handbags and watches.
Following the lackluster performance, management cut its fiscal 2016 earnings guidance. Macy’s now envisions fiscal 2016 earnings in the band of $2.95–$3.10, down from the range of $3.15–$3.40, projected earlier. Moreover, it expects comps, on an owned plus licensed basis, to come in at the lower end of the previously announced sales guidance of 2.5–3% decline. On an owned basis, comps are expected to be down roughly 50 basis points.
Consequently, estimate revisions have moved south over the past 30 days. In the said time frame, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has decreased 20 cents and 34 cents to $3.07 and $3.14, respectively.
Further, we noted that in fiscal 2016 net sales dipped 7.4%, 3.9% and 4.2% in the first, second and third quarters, respectively, while earnings per share declined 28.6%, 15.6% and 69.6% during the respective quarters.
However, 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 omni-channel capabilities. Going forward, 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.
The company stated that store closures will lower its 2017 sales by approximately $575 million.
Nonetheless, Macy’s focus on price optimization, inventory management, merchandise planning and private label offering are the primary growth catalysts. Also, it has been widening its operations via deals and collaborations in order to fortify its customer base.
Bottom Line
We observed that Macy’s shares have fallen 15.2% in the past six months, compared with the Retail-Regional Department Stores industry’s decline of 10.8%. Therefore, only time will tell whether these strategic endeavors will bring the company back on its growth trajectory.
Key Picks
Better-ranked stocks in the broader retail sector include The Children's Place, Inc. (PLCE - Free Report) , Christopher & Banks Corporation and Tilly's, Inc. (TLYS - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Children's Place, with a long-term earnings growth rate of 10.3%, has surged a whopping 61.5% in the past one year.
Christopher & Banks, with a long-term earnings growth rate of 15%, has jumped 53.3% in the past one year.
Tilly's, with a long-term earnings growth rate of 13%, has skyrocketed 120.9% in the past six months.
"Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>"
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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