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Why Is Macy's (M) Up 11.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Macy's (M - Free Report) . Shares have added about 11.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Macy's due for a pullback? 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 catalysts.

Macy's Q4 Earnings Beat, Comparable Sales Increase Y/Y

Macy’s, Inc. continued its sturdy performance in fourth-quarter fiscal 2021, despite supply chain bottlenecks, labor shortages and elevated inflation. Both the top and the bottom lines not only beat the Zacks Consensus Estimate but also increased year over year. Effective implementation of Polaris Strategy, strategic allocation of capital, robust omni-channel capabilities and solid consumer demand helped post stronger-than-anticipated results.

The department store bellwether witnessed sturdy growth across all three brands, namely; Macy’s, Bloomingdale’s and Bluemercury. Macy’s provided fiscal 2022 view that was better than analysts’ expectations. The company raised quarterly dividend as well as authorized a new $2 billion share repurchase program.

Sales & Earnings Picture

Macy’s reported adjusted earnings of $2.45 per share that surpassed the Zacks Consensus Estimate of $2.00. The bottom line showcased an improvement from adjusted earnings of 80 cents reported in the year-ago period, thanks to higher net sales and margin expansion.

Net sales of $8,665 million outpaced the Zacks Consensus Estimate of $8,450 million. The top line increased 27.8% on a year-over-year basis. Comparable sales surged 28.3% on an owned basis and 27.8% on an owned-plus-licensed basis year over year.

The company’s digital sales increased 12% from the prior-year quarter. The metric surged 36% from fourth-quarter fiscal 2019 levels. Digital penetration was 39% of net sales in the quarter under review. This reflected a 5-percentage point contraction from the prior-year period’s level but a 9-percentage point improvement over fourth-quarter fiscal 2019. Approximately 63% of digital demand sales came from mobile devices. Stores fulfilled 28% of the digital sales in the quarter.

Net credit card revenues amounted to $264 million, up $6 million from the year-ago period and $25 million from fourth-quarter fiscal 2019. The metric represented 3% of sales, down 80 basis points year on year but up 10 basis points from the fourth-quarter fiscal 2019 level.

Brand-Wise Detail

Comparable sales across the Macy’s, Bloomingdale and Bluemercury brands rose 27.3%, 37.8% and 30.9% on an owned basis year over year. On an owned-plus-licensed basis, comparable sales across these brands increased 26.5%, 37.6% and 30.9% year on year, respectively.

In the reported quarter, Macy’s brand added 7.2 million new customers, which increased 11% from the fourth-quarter fiscal 2019 level. Of the new customers, 58% came through the digital channel. The company witnessed strong growth across categories like fragrances, fine jewelry, home décor, men’s outerwear, toys, sleepwear and watches.

The company stated that Platinum, Gold and Silver customers in the Star Rewards Loyalty program continued to engage. Average customers spend rose 9% compared with fourth-quarter fiscal 2019 levels. The Bronze segment, which comprises the most diverse loyalty tier, continued to grow by adding 3.5 million members.

Management informed that about 391,000 new customers shopped the Bloomingdale’s brand, reflecting an increase of 26% from fourth-quarter fiscal 2019. Customer spend rose 41%. Under the Bloomingdale banner, growth was mainly driven by strong sales of luxury handbags, fine jewelry, men’s shoes and contemporary, fragrances and home. Meanwhile, the activation and return of customers to stores combined with sustained digital strength contributed to robust sales performance across the Bluemercury brand.


Gross margin came in at 36.5%, up from 33.7% in the prior-year quarter but down from 36.8% in fourth-quarter fiscal 2019. The year-over-year upside was driven by improved merchandise margin owing to benefits from pricing, promotion and inventory productivity enhanced by the Polaris strategy. Delivery expenses, as a percentage of sales, climbed 190 basis points from fourth-quarter fiscal 2019 levels stemming from increased digital penetration and holiday delivery expense surcharges.

SG&A expense increased 18.8% year over year to $2,429 million. However, as a percentage of sales, SG&A expense contracted 220 basis points year on year to 28%. This can be attributed to effective expense management and improved productivity resulting from Polaris Strategy, including the permanent cost savings realized in fiscal 2020.

Macy’s reported adjusted EBITDA of $1,247 million, up considerably from adjusted EBITDA of $789 million in the year-ago quarter. We note that adjusted EBITDA margin expanded 280 basis points to 14.4% from the prior-year period.

Other Financial Aspects

Macy’s ended the quarter with cash and cash equivalents of $1,712 million, long-term debt of $3,295 million and shareholders' equity of $3,621 million.

The company repaid $1.6 billion of debt early in fiscal 2021 that resulted in year-end adjusted Debt-to-Adjusted EBITDAR leverage ratio of 1.8x, well below initial target of 2.5x and materially better than pre-pandemic levels.

The company exhausted its $500 million share repurchase program in the final quarter of fiscal 2021. It repurchased a total of 20.5 million shares in the fiscal year. Following the completion, the company’s board of directors authorized a new $2 billion share repurchase program. The company raised its quarterly dividend by 5% to 15.75 cents a share.

During fiscal 2021, Macy’s generated cash flow from operating activities of $2,712 million and incurred capital expenditures of $597 million. It generated a free cash flow of $2,279 million for the fiscal year. Management expects capital expenditures of approximately $1 billion for fiscal 2022 and roughly $3 billion over the three years. It expects to generate free cash flow between $3.2 billion and $3.6 billion over the next three years.

Sneak Peek into Guidance

Macy’s expects fiscal 2022 net sales in the bracket of $24,460 million to $24,700 million. This suggests flat to up 1% growth versus fiscal 2021. It guided comparable owned-plus-licensed sales three-year CAGR of approximately 1.1-1.4%. Management forecast digital sales to be about 37% of net sales and credit card revenues, net, to be roughly 2.9% of net sales.

The company projected fiscal 2022 gross margin rate in the band of 38.1-38.3% (versus 38.9% in fiscal 2021) and SG&A expense rate in the range of 33.7-33.9% (versus 32.9% in the prior year). It estimated an adjusted EBITDA margin between 11% and 11.5% compared with 13.6% in fiscal 2021.

Macy’s envisions fiscal 2022 adjusted earnings between $4.13 and $4.52 per share. However, the current view indicates a decline from adjusted earnings of $5.31 per share reported in fiscal 2021.

For first-quarter fiscal 2022, management anticipates net sales between $5,270 million and $5,370 million. This indicates an improvement from net sales of $4,706 million reported in the year-ago period. It guided first-quarter adjusted earnings in the band of 77-85 cents a share. This suggests an increase from 39 cents reported in first-quarter fiscal 2021.

Three-year Outlook

Macy’s is targeting adjusted EBITDA margin within the range of 11.5-12% by fiscal 2024. It expects a low-single digit compound annual growth rate for net sales and digital penetration in the low- to mid-40s as a percentage of net sales by 2024.

The company anticipates gross margin rate in the high-30s, reflecting sturdy solid merchandise margins aided by lean inventory levels and the profitability from pricing initiatives and the digital marketplace as well as the mitigation of delivery expense.

Macy’s estimates SG&A expense over the next three years to be higher from 2021 levels, peaking in 2022 owing to investments in wage and benefit packages.

The company envisions credit card revenues as a percent of net sales to be marginally lower than historical average of 3% in the near-term before improving to about 3% of net sales by 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 68.98% due to these changes.

VGM Scores

At this time, Macy's has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

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