Send me real-time posts from this site at my email
Zacks

Macy's Down More Than 10% YTD: Can Efforts Aid Turnaround?

Shares of Macy's, Inc. M have lost approximately 13% so far this year compared with the industry’s growth of 2.1%. The stock slid following dismal sales from the holiday season, which coincides with the company’s fourth-quarter fiscal 2018. Although the company posted positive comps during the final quarter, results failed to live up to expectations. Net sales also declined from the year-ago quarter. Also, the company’s gross margin was affected by lower merchandise margin due to inventory clearance. Apart from these, the company’s fiscal 2019 view isn’t much inspiring.

For fiscal 2019, Macy’s anticipates net sales to be roughly flat year over year. Comparable sales (comps) on an owned plus licensed basis and comps on an owned basis are projected to be flat to up 1%. In fiscal 2018, comps on an owned plus licensed basis grew 2%. Management envisions adjusted earnings per share in the range of $3.05-$3.25 (excluding asset sale gains, EPS is expected in the $2.80-$3.00 range) for fiscal 2019, down from $4.18 reported in fiscal 2018. Moreover, management expects gross margin to be down moderately in the first half and marginally in the second half of fiscal 2019.



Efforts Well on Track

In an attempt to boost sales, profitability and cash flow, Macy’s has been focusing on price optimization, inventory management, merchandise planning, private label offering and omnichannel capabilities. Also, the company has undertaken restructuring actions, which involve streamlining the upper management teams. These efforts are likely to result in annual cost savings of $100 million starting fiscal 2019. The company is also committed to strengthening its balance sheet by reducing debt.

Moreover, the company highlighted that it will proceed with its Backstage, Vendor Direct, Store Pickup, Loyalty Program, Growth150 stores, ‘mobile first’ strategy and Destination Businesses to drive growth. It will invest in areas where it has a strong foothold, like dresses, fine jewelry, big ticket, men’s tailored, women's shoes and beauty. The company’s “Buy Online Pickup in Store” and "Buy Online Ship to Store" initiatives are also gaining traction.

Macy’s acquired STORY, a concept store, to enhance in-store customer experience. The company has added a new feature to its mobile app called Mobile Checkout, which allows customers to scan bar codes of items and pay via smartphones. Macy's is steadily expanding its virtual reality furniture gallery. The company has taken a minority stake in b8ta, a technology retailer that allow customers to try, buy and learn about new tech products. The investment is seen as an initiative to enhance customer shopping experience at The Market @ Macy's, a store-within-a-store retail concept. It plans to double the number of such stores.

Backed by the aforementioned tailwinds, we expect this Zacks Rank #3 (Hold) stock to return on its growth trajectory. We notice that in a month, shares of Macy’s have risen 8.9% compared with the industry’s growth of 5.5%.

3 Stocks to Watch

Foot Locker, Inc. FL delivered average positive earnings surprise of 9.7% in the trailing four quarters. It has a long-term earnings growth rate of 9.4% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation COST has a long-term earnings growth rate of 8.9% and a Zacks Rank #2 (Buy).

Target Corporation TGT has a long-term earnings growth rate of 6.3% and a Zacks Rank #2.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Foot Locker, Inc. (FL): Free Stock Analysis Report
 
Costco Wholesale Corporation (COST): Free Stock Analysis Report
 
Target Corporation (TGT): Free Stock Analysis Report
 
Macy's, Inc. (M): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Welcome!!! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue