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Macy's (M) Holiday Comps Fails to Lift Investor Sentiment

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Despite taking a slew of measures to improve performance Macy’s, Inc.’s (M - Free Report) holiday sales witnessed only a modest gain during the holiday season. Comparable sales on an owned plus licensed basis increased 1.1% during November and December period combined, while on an owned basis, comparable sales inched up 1%.

Following, the holiday sales numbers the company’s shares decreased 3.3% yesterday. In fact, the company’s shares have witnessed a decline of 15.5% in a year, compared with the industry’s decrease of 1.6%.

Macy’s informed that digital business remained robust and also witnessed improvement in sales trend at stores. Further, holiday sales showed strength at Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s The Outlet and Bluemercury. Active apparel, shoes, dresses, coats, fine jewelry, men’s tailored clothing, children's and home categories also marked strong sales.

Cost Savings Initiatives

Macy's, which has already taken a number of strategic initiatives to improve performance announced few more measures to support growth plan. Under its current plan, the company will shut down 11 stores in the early part of 2018 and will not only hire employee but will also layoff at some stores. Further, the company will streamline some of the non-functional stores.

These efforts will result in annual cost saving of $300 million beginning 2018 and also one-time charges of nearly $160 million or 33 cents in the fourth quarter of 2017.

The company has closed 81 Macy’s stores, as part of its planned closure of about 100 stores announced in August 2016, and plans to shutter about 19 more stores.

Guidance

Following modest increase in holiday sales, the company has narrowed sales guidance. The company now expects sales for fiscal 2017 on an owned basis to decline between 2.4% and 2.7%, compared with the prior guided range of decrease by 2.2-3.3%. Moreover, on an owned plus licensed basis comps are expected to decrease between 2% and 2.3%, compared with previous guidance of decline in the range of 2-3%. Further, management expects total sales decrease by 3.6-3.9% in fiscal 2017.

The company now anticipates adjusted earnings per share in the range of $3.59 and $3.69, compared with the earlier guided range of $3.38 and $3.63. Further, excluding the impact of gain from the sale of the Union Square Men’s building adjusted earnings are expected to be between $3.11 and $3.21, compared with the previous guidance of $2.91-$3.16.

Although heading in the right direction, it is still to be seen whether these efforts will help lift the performance of this Zacks Rank #3 (Hold) company in the near future.

Hot Stocks in the Retail Space Worth Checking Out

Investors interested in the retail space may consider better-ranked stocks such as American Eagle Outfitters, Inc. (AEO - Free Report) , Zumiez Inc. (ZUMZ - Free Report) and The Buckle, Inc. (BKE - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Eagle Outfitters has a long-term earnings growth rate of 7.5%.

Zumiez has an impressive long-term earnings growth rate of 18%.

Buckle has reported better-than-expected earnings surprise in three of the trailing four quarters, with an average earnings beat of 3.8%.

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