It has been about a month since the last earnings report for Macy's (
M Quick Quote M - Free Report) . Shares have lost about 0.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Macy's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Macy's Q1 Earnings & Sales Top Estimates, View Raised
Macy’s posted robust first-quarter fiscal 2021 results, with the top and the bottom line improving year on year and beating the Zacks Consensus Estimate. Further, the company raised view for fiscal 2021.
Management highlighted that the quarterly performance gained from strong sales across all three brands namely; Macy’s, Bloomingdale’s and Bluemercury. Additionally, the company gained from accelerated execution of the Polaris strategy and prudent investments in the digital arena. Moreover, positive effects of the government stimulus as well as the roll-out of vaccines acted as added upsides during the quarter. Going ahead, management expects to keep gaining from growth in its digital business and therefore plans to continue investing toward boosting omni-channel capabilities. Moreover, the company expects to keep gaining from efforts undertaken as part of the Polaris strategy. Q1 in Details
Macy’s reported adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate of a loss of 41 cents. Moreover, the bottom line improved from a loss of $2.03 reported in the year-ago quarter.
Net sales of $4,706 million came ahead of the Zacks Consensus Estimate of $4,458 million. The top line increased nearly 56% on a year-over-year basis. Additionally, we note that comparable sales surged 62.5% on an owned basis and 63.9% on an owned plus licensed basis. Impressively, the company’s digital sales rallied 34% from the year-ago quarter’s figure and contributed 37% to net sales. Digital penetration in net sales reflects a 6 percentage point decline, as compared to the prior-year period when stores were closed. During the quarter, the company witnessed Platinum, Gold and Silver customers re-engage in its Star Rewards Loyalty program. Its Bronze segment, which comprises the most diverse loyalty tier, continued to grow by adding 1.7 million members. Moreover, the company acquired 4.6 million new customers, of which 47% came through the digital channel. Net credit card revenues amounted to $159 million, up 21.4% year on year. The metric contributed 3.4% to sales. Furthermore, gross margin amounted to 38.6%, increasing considerable from 17.1% in the prior-year quarter. The upside was driven by increased merchandise margin, which in turn was supported by inventory productivity and the execution of the Polaris strategy. Moreover, delivery expenses declined 20 basis points from the year-ago quarter’s figure. SG&A expense increased 9.4% year over year to $1,748 million. SG&A expenses were 37.1% of sales compared with 52.9% of sales in the year-ago quarter. Macy’s reported adjusted EBITDA of $473 million against adjusted EBITDA loss of $689 million in the year-ago period. Financial Aspects
Macy’s had cash and cash equivalents of $1,798 million as at the end first-quarter fiscal 2021. The company’s strong cash position was aided by effect capital management as well as strong performance. Merchandise inventories, as of May 1, 2021, amounted to $4,230 million. During the first quarter, inventory declined 23.1% year on year. Long-term debt and shareholders’ equity were $4,558 million and $2,675 million, respectively, as at the end of the reported quarter.
Management remains impressed with the company’s first-quarter performance. This along with faster-than-anticipated economic recovery led management to raise its view for fiscal 2021. The company expects net sales in the bracket of $21.73-$22.23 billion compared with $19.75-$20.75 billion predicted earlier. Further, adjusted earnings are anticipated in the range of $1.71-$2.12 compared with the prior anticipation of earnings in the range of 40-90 cents. The Zacks Consensus Estimate for sales and adjusted earnings in fiscal 2021 is currently pegged at $20.9 billion and 77 cents per share, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 169.1% due to these changes.
Currently, Macy's has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Macy's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.