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Macy's (M) Up 15.7% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Macy's, Inc. (M - Free Report) . Shares have added about 15.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is M due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Macy’s, Inc. posted the fourth straight quarter of positive earnings surprise, when it reported first-quarter fiscal 2018 results. Total sales also came ahead of the consensus mark after falling short of the same in the preceding two quarters.
The company highlighted that impressive performance across Macy’s, Bloomingdale’s and Bluemercury brands boosted results. Management hinted that North Star Strategy, comprising merchandising and marketing activities, bode well for the company. Solid consumer spending and considerable rise in international tourism spending also favorably impacted the quarter.
Sturdy results prompted this US department store chain to lift sales and earnings view for fiscal 2018.
Let’s Delve Deep
Macy’s posted adjusted earnings of 48 cents a share, excluding impairment and other costs, compared with 26 cents reported in the year-ago period. Also excluding gain from sales of assets, earnings came in at 42 cents, up from 12 cents delivered in the prior-year quarter. We note that the bottom line comfortably surpassed the Zacks Consensus Estimate of 36 cents.
The company generated net sales of $5,541 million that beat the Zacks Consensus Estimate of $5,444 million and increased 3.6% year over year. Credit card revenues fell 2.5% to $157 million.
Comparable sales (comps) on an owned plus licensed basis jumped 4.2%, while on an owned basis comps rose 3.9%. Strategic investments across stores, technology and merchandising are likely to cushion comparable sales growth. Total transactions rose 1% with average unit retail up 5% but units per transaction down 2%.
Shift of Friends and Family event from the second quarter to the first favorably impacted comps by approximately 250 basis points. Excluding this, comps were up 1.7% on an owned plus licensed basis.
In an attempt to augment sales, profitability and cash flows, the company has been taking steps such as cost cutting, integration of operations as well as developing its e-commerce business. The company registered double-digit growth in digital business.
Moreover, as part of the store rationalization program, the company plans to shut down underperforming stores. These are seen as part of the company’s endeavors to better withstand competitive pressure from both brick-and-mortar discount stores and online retailers.
Coming back to the results, gross margin expanded 70 basis points to 39%. Adjusted operating income surged 17.4% to $257 million, while adjusted operating margin increased 50 basis points to 4.6%. Management expects gross margin on retail sales to be flat to up marginally during fiscal 2018.
Other Financial Aspects
Macy’s, which reached an agreement to end the joint venture with Fung Retailing Limited, ended the quarter with cash and cash equivalents of $1,531 million, long-term debt of $5,857 million, and shareholders’ equity of $5,821 million, excluding non-controlling interest of $20 million.
FY18 View
Macy’s now projects comps on an owned plus licensed basis to increase in the band of 1-2%, while comps on an owned basis are expected to be 20-30 basis points lower than the same. Net sales are anticipated to be down 1% to up 0.5% in fiscal 2018. Management expects annual credit card revenues between $675 million and $690 million.
Management now envisions adjusted earnings in the range of $3.75-$3.95 per share for fiscal 2018, up from prior view of $3.55-$3.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted downward by 5.8% due to these changes.
At this time, M has an average Growth Score of C, however its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, M has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Macy's (M) Up 15.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Macy's, Inc. (M - Free Report) . Shares have added about 15.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is M due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Macy's Tops Q1 Earnings Estimates, Raises FY18 View
Macy’s, Inc. posted the fourth straight quarter of positive earnings surprise, when it reported first-quarter fiscal 2018 results. Total sales also came ahead of the consensus mark after falling short of the same in the preceding two quarters.
The company highlighted that impressive performance across Macy’s, Bloomingdale’s and Bluemercury brands boosted results. Management hinted that North Star Strategy, comprising merchandising and marketing activities, bode well for the company. Solid consumer spending and considerable rise in international tourism spending also favorably impacted the quarter.
Sturdy results prompted this US department store chain to lift sales and earnings view for fiscal 2018.
Let’s Delve Deep
Macy’s posted adjusted earnings of 48 cents a share, excluding impairment and other costs, compared with 26 cents reported in the year-ago period. Also excluding gain from sales of assets, earnings came in at 42 cents, up from 12 cents delivered in the prior-year quarter. We note that the bottom line comfortably surpassed the Zacks Consensus Estimate of 36 cents.
The company generated net sales of $5,541 million that beat the Zacks Consensus Estimate of $5,444 million and increased 3.6% year over year. Credit card revenues fell 2.5% to $157 million.
Comparable sales (comps) on an owned plus licensed basis jumped 4.2%, while on an owned basis comps rose 3.9%. Strategic investments across stores, technology and merchandising are likely to cushion comparable sales growth. Total transactions rose 1% with average unit retail up 5% but units per transaction down 2%.
Shift of Friends and Family event from the second quarter to the first favorably impacted comps by approximately 250 basis points. Excluding this, comps were up 1.7% on an owned plus licensed basis.
In an attempt to augment sales, profitability and cash flows, the company has been taking steps such as cost cutting, integration of operations as well as developing its e-commerce business. The company registered double-digit growth in digital business.
Moreover, as part of the store rationalization program, the company plans to shut down underperforming stores. These are seen as part of the company’s endeavors to better withstand competitive pressure from both brick-and-mortar discount stores and online retailers.
Coming back to the results, gross margin expanded 70 basis points to 39%. Adjusted operating income surged 17.4% to $257 million, while adjusted operating margin increased 50 basis points to 4.6%. Management expects gross margin on retail sales to be flat to up marginally during fiscal 2018.
Other Financial Aspects
Macy’s, which reached an agreement to end the joint venture with Fung Retailing Limited, ended the quarter with cash and cash equivalents of $1,531 million, long-term debt of $5,857 million, and shareholders’ equity of $5,821 million, excluding non-controlling interest of $20 million.
FY18 View
Macy’s now projects comps on an owned plus licensed basis to increase in the band of 1-2%, while comps on an owned basis are expected to be 20-30 basis points lower than the same. Net sales are anticipated to be down 1% to up 0.5% in fiscal 2018. Management expects annual credit card revenues between $675 million and $690 million.
Management now envisions adjusted earnings in the range of $3.75-$3.95 per share for fiscal 2018, up from prior view of $3.55-$3.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted downward by 5.8% due to these changes.
Macy's, Inc. Price and Consensus
Macy's, Inc. Price and Consensus | Macy's, Inc. Quote
VGM Scores
At this time, M has an average Growth Score of C, however its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, M has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.