Macy’s Shares Jump After Earnings Blow Past Estimates and Company Raises Outlook

Macy’s shares jumped over 6% in pre-market trading on Tuesday after the fashion retailer generated higher earnings than expected in the holiday quarter and forecast better sales for this year.

The U.S.-based fashion retailers reported quarterly adjusted earnings of $2.45​​ per share in the fiscal fourth quarter ended Jan. 29, beating the market expectations of $2.00 per share. The company said its revenue surged more than 27% to $8.67 billion from a year earlier. That too topped the market expectations of $8.47 billion.

The New York-based Macy’s said its digital sales rose 12% compared to the fourth quarter of 2020 and jumped 36% versus the fourth quarter of 2019.

The company gross margin for the year was 38.9%, up from 29.2% in 2020 and up 70 basis points from 2019. The fashion retailers forecast sales in the range of $24.46 billion and $24.70 billion for 2022. That was above analysts’ estimates of $24.2 billion.

“The resolution of the co’s evaluation of an e-com spin (prompted by an activist in Nov-21), is to remain integrated. This isn’t a big surprise as the activist heat had cooled and the complexity & risk ratio was high. Post-eval, Macy’s (M) is doubling down on its strategy — “accelerating Polar is initiatives that span digital, brand partners, private label, marketing and loyalty,” noted Stephanie Wissink, equity analyst at Jefferies.

Macy’s (M) also recommitted to its off-mall, small-format store rollout, and we look for an update on the mall-based dept stores marked for closure (paused in 2H21).”

Following this, Macy’s stock surged over 6% to $27.28 in pre-market trading on Tuesday. The stock fell nearly 2% so far this year after surging over 132% in 2021.

Analyst Comments

Macy’s continues to undergo core operating challenges, similar to peers in the department store space (eg. market share cessation to peers, falling store traffic, contracting margins, eCommerce disintermediation). Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” noted Kimberly Greenberger, Equity Analyst at Morgan Stanley.

“Expense cuts (eg. headcount reduction), real estate monetization, and secondary growth initiatives are encouraging, but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. We anticipate COVID related disruption accelerates market share loss to peers, especially to brands with owned eComm.”

Macy’s Stock Price Forecast

Eight analysts who offered stock ratings for Macy’s in the last three months forecast the average price in 12 months of $36.63 with a high forecast of $50.00 and a low forecast of $25.00.

The average price target represents a 42.53% change from the last price of $25.70. Of those eight analysts, four rated “Buy”, three rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $23 with a high of $35 under a bull scenario and $15 under the worst-case scenario. The investment bank gave an “Underweight” rating on the department store chain company’s stock.

Several analysts have also updated their stock outlook. Deutsche Bank cut the target price to $32 from $35. Telsey Advisory lowered the price objective to $30 from $40. Citigroup slashed the price target to $25 from $29.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator giving a mixed signal.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Caesars Entertainment, Home Depot, Lowe’s and Moderna in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 21

Monday (February 21)

The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday (February 22)

IN THE SPOTLIGHT: CAESARS ENTERTAINMENT, HOME DEPOT

CAESARS: The largest casino-entertainment Company in the U.S. company is expected to report its fourth-quarter loss of $-0.71 per share, up over 58%, better compared to a loss of $-1.7 per share seen in the same period a year ago. The Las Vegas-based company would post revenue growth of over 77% to $2.58 billion.

Caesars Entertainment (CZR) is currently trading at below its historical NTM multiple on 2023e EBITDAR, despite our expectation of >1,000bps higher core casino margins and faster growth. We believe regional casino markets (55% of mix) have structural tailwinds from customers acquired post-COVID and sports betting legalization,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We expect CZR to improve its sports betting / iGaming market share in coming qtrs, a key driver to Gaming stocks in recent years. High leverage now (7.5x at YE21) but significant FCF and a planned Vegas asset should drive leverage to ~5x by YE22, opening up a broader investor base.”

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its fourth-quarter earnings of $3.22 per share, which represents year-over-year growth of over 17% from $2.74 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 7% to $34.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

TICKER COMPANY EPS FORECAST
CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

 

Wednesday (February 23)

IN THE SPOTLIGHT: LOWE’S

Home improvement retailer Lowe’s is expected to report its fourth-quarter earnings of $1.69 per share, which represents year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago. The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

TICKER COMPANY EPS FORECAST
BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

 

Thursday (February 24)

IN THE SPOTLIGHT: MODERNA

Moderna, the biotech company focused on drug discovery, is expected to report its fourth-quarter earnings of $8.62 per share, which represents year-over-year growth of over 1,340% from a loss of -$0.69 per share seen in the same period a year ago.

The Massachusetts-based biotechnology company would post revenue growth of 1,075% to around $6.71 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

TICKER COMPANY EPS FORECAST
ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

 

Friday (February 25)

TICKER COMPANY EPS FORECAST
AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

 

What Fuels The Stock Market Now?

An outstanding earnings season and signs that economic activity are picking back up are clashing with unrelenting inflation, difficulty finding more labor, and continued supply chain logjams.

Inflation

Most insiders believe inflation has further to climb, though the consensus right now is calling for a peak around the beginning of Q2 next year. With big shopping holidays in the U.S. coming up, followed closely by Chinese New Year at the beginning of February 2022, shipping and transportation logjams aren’t expected to find much relief in the near-term.

Meaning inflation pressures will likely continue. How far inflation will climb as the severe supply chain dislocations drag on is a huge unknown. Some Wall street investors are concerned that the Fed might feel compelled to end its asset purchases and hike rates much sooner than expected if monthly inflation keeps accelerating.

What might be even more worrisome is the fear that some of these price increases could be more permanent in nature, so how much overall inflation will pull back in the long run is starting to become a bigger talking point.

Demand and supply chain

Supply chain insiders warn that many companies are front-loading inventories in an effort to avoid running out of critical materials, which could bite in the long run if demand suddenly drops off. A lot of manufacturers have also increased production capacity for products that currently face shortages. The risk is that once back orders are filled and demand retreats, stockpiling and excess production could result in an oversupply situation in some areas, along with much lower profits and total revenues.

Another worry right now is that demand starts to retreats due to the current inflationary environment especially with everyday items like food and gasoline costing substantially more. That has investors anxious to see the latest Consumer Sentiment read being released today which is expected to edge higher vs. last month.

Investors are closing tracking the inflation expectation gauges in the report as typically the higher those climb, the more consumers tend to pull back on spending.

Data to watch next week

Looking towards next week, the economic data flow picks up with key releases including Empire State Manufacturing on Monday; Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Tuesday; Housing Starts and Building Permits on Wednesday; and the Philadelphia Fed Index on Thursday.

On the earnings front, Q3 reporting is just about wrapped up with companies in the S&P 500 index reporting revenue growth of more than +17%, the second highest on record behind only Q2 2021’s growth of over +25%, according to FactSet. Earnings themselves are on track to exceed +40%. AstraZeneca is today’s earnings highlight. Earnings next week include several big retailers which will provide some more clues as to how consumer demand is trending as well as updates on supply chain struggles. Investors are also keen to hear how holiday hiring is going.

Key earnings reports next week will include Advanced Auto Parts, Lucid, Tyson, and Warner Music on Monday; Home Depot and Walmart on Tuesday; Bath & Body Works, Cisco, Lowe’s, NVIDIA, Target, TJX, and Victoria’s Secret on Wednesday; Alibaba, Applied Materials, Intuit, Kohl’s, Macy’s, Palo Alto Networks, Ross Stores, and Williams Sonoma on Thursday; and The Buckle and Foot Locker on Friday.

Checking in on the geopolitical front, the U.S. is warning that Russia may be planning a full-scale invasion of Ukraine. U.S. officials say they’ve briefed their EU counterparts about concerns over a possible military operation, citing a buildup of Russian troops along the Ukraine border. Tensions are boiling still in Belarus and Russia is fanning the flames on that front as well.

SP500 commentary

ES ##-## (Daily) 2021_11_14 (1_49_54 AM)

The bearish accumulation divergence played very well last week. Moreover, the Advance Decline Line is weaker than the price is. It is also a negative factor in the short term. Potentially SP500 started the formation of the bull flag. Finding support at lower levels would be a great buying point with a target of 4800.

The major economic indicators are still bullish despite rising inflation. 4500 level is a psychological level bears will target if 4600 fails. Current levels can be considered only for intraday trading. At the same time, lower levels are needed to get a good risk/reward ratio for swing traders.

For a look at all of today’s economic events, check out our economic calendar.

Earnings Week Ahead: Advance Auto Parts, Home Depot, Nvidia and Ross Stores in Focus

Earnings Calendar For The Week Of November 15

Monday (November 15)

IN THE SPOTLIGHT: ADVANCE AUTO PARTS

The leading automotive aftermarket parts retailer Advance Auto Parts is expected to report its third-quarter earnings of $2.87 per share, which represents year-over-year growth of over 2% from $2.81 per share seen in the same period a year ago.

The Raleigh, North Carolina-based company would post revenue growth of nearly 2% to $2.6 billion up from $2.54 billion registered a year earlier. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

Advance Auto Parts (AAP) operates in a defensive (recession-resistant) category and has one of the largest long-term EBIT margin expansion opportunities in our coverage (we estimate 300-400 bps over time). COVID-19 slowed parts of AAP’s transformation but gross and EBIT margin upside from internal initiatives is still expected beginning in 2021,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Significant and improving FCF generation plus share repurchases likely to enhance EPS growth. We think the combination of a defensive category, AAP’s progress generating stable top-line growth, and significant margin upside all make for an upside case. Slowing topline momentum and associated risk to margin trajectory balance the risk/reward skew.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 15

Ticker Company EPS Forecast
AAP Advance Auto Parts $2.87
JJSF J&J Snack Foods $1.28
CMP Compass Minerals International $0.62

Tuesday (November 16)

IN THE SPOTLIGHT: HOME DEPOT

The largest home improvement retailer in the United States, Home Depot, is expected to report its third-quarter earnings of $3.39 per share, which represents year-over-year growth of about 7% from $3.18 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 4% to $34.942 billion from $33.54 billion a year earlier. In the last two years, the company has beaten earnings per share (EPS) estimates in most of the quarters with a surprise of over 5%.

Home Depot shares have gained nearly 40% so far this year. The stock closed 1.36% higher at $372.63 on Friday. Home Depot’s better-than-expected results, which will be announced on Nov 16, could help the stock hit new all-time highs.

“Shares of Home Depot have risen and outpaced the industry year to date. The company boasts a robust surprise trend with the fifth straight quarter of earnings and sales beat in second-quarter fiscal 2021. Results gained from continued demand for home improvement projects, the robust housing market and ongoing investments. The company is effectively adapting to the demand for renovations and construction activities, driven by prudent investments,” noted analysts at ZACKS Research.

“It is gaining from growth in Pro and DIY customer categories as well as digital momentum. However, in the second quarter, the company witnessed year-over-year moderation in its comparable-store sales growth. This was due to the lapping of the high demand environment for home-improvement projects seen last year. Soft gross margin, stemming from increased penetration of lumber, has also been a drag.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 16

Ticker Company EPS Forecast
ICP Intermediate Capital £32.70
HSV Homeserve £6.60
ARMK Aramark $0.19
HD Home Depot $3.35
DLB Dolby Laboratories $0.35
LAND Land Securities £18.78
IMB Imperial Brands PLC £138.10

Wednesday (November 17)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company, Nvidia, is expected to report its third-quarter earnings of $1.11 per share, which represents a year-over-year decline of over 60% from $2.91 per share seen in the same period a year ago.

The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 40% to $6.8 billion.

According to Oppenheimer analyst Rick Schafer, Nvidia will report above-consensus October quarter results, lifting its price target to $350 from $235 and rating the company “outperform”.

“Supply constraints continue to weigh on the group, though we see Nvidia (NVDA), a top semi-supplier, as better positioned to secure capacity. The company’s leading soup-to-nuts software/hardware platform solidifies its AI accelerator dominance,” Oppenheimer analyst Rick Schafer wrote in his report, reported by Reuters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 17

Ticker Company EPS Forecast
BLND British Land Company £8.75
SGE The Sage Group £11.11
LOW Lowe’s Companies $2.33
CPRT Copart $0.99
NVDA Nvidia $1.11
CPA Copa -$0.19
KLIC Kulicke And Soffa Industries $2.07
TTEK Tetra Tech $1.00
HI Hillenbrand $0.91
SSE SSE £11.80

Thursday (November 18)

IN THE SPOTLIGHT: ROSS STORES

The second-largest off-price retailer in the U.S., Ross Stores, is expected to report its third-quarter earnings of $0.79 per share, which represents a year-over-year decline of over 24% from $1.02 per share seen in the same period a year ago.

The U.S. home fashion chain would post year-over-year revenue growth of nearly 16% to $4.4 billion. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

“Market share capture from competitor bankruptcies & store closures, favourable customer fundamentals, and high exposure to Hispanics, the fastest-growing US population segment, support 6-8% long-term revenue growth and 10%+ annual EPS. Upward EPS revisions appear an ongoing positive share price catalyst. Profit flow-through is magnified when comps exceed the 1-2% plan in a typical year,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“The ‘everyday value’ proposition fosters comp outperformance, while recessions accelerate customer acquisition. Low average selling prices ($8-10/unit) and narrow gross margin render selling online unprofitable at this price point.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 18

Ticker Company EPS Forecast
NG National Grid £15.70
HLMA Halma £21.19
RMG Royal Mail -£6.30
NJR New Jersey Resources $0.08
KSS Kohl’s $0.69
HP Helmerich & Payne -$0.50
MMS Maximus $0.87
BJ BJs Wholesale Club Holdings Inc $0.79
M Macy’s $0.29
BERY Berry Plastics $1.53
NUAN Nuance Communications $0.20
BRC Brady $0.76
ROST Ross Stores $0.79
INTU Intuit $0.97
FTCH Farfetch -$0.24
ESE ESCO Technologies $0.78

Friday (November 19)

Ticker Company EPS Forecast
BKE Buckle $0.80
FL Foot Locker $1.34

 

Marketmind: Some Relief – But How Long Will it Last?

A look at the day ahead from Dhara Ranasinghe.

U.S. stock futures, the yuan and the risk-sensitive Australian dollar are riding high, while the safe-haven yen and U.S. Treasuries are on the back foot.

Don’t get too comfortable — even if Evergrande makes its Sept. 23 onshore bond payment, it has not indicated whether it can pay $83.5 million in interest due on its March 2022 bond on Thursday. Nor is there any sign the Chinese government plans to mount a last-minute rescue.

And with the U.S. Federal Reserve set to conclude its two-day meeting later on Wednesday, perhaps this week’s market excitement is not over yet.

After all gas prices are at lofty levels, threatening to hurt consumption, which means central banks meeting across the globe this week are likely to be challenged on the message that inflation is transitory.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

It might however clear the way for tapering later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.

The Bank of Japan just kept monetary policy steady but offered a bleaker view on exports and output, reinforcing expectations it won’t join peers mulling a withdrawal of crisis-mode support.

Elsewhere, Democrats in the House of Representatives passed a bill on Tuesday to fund the U.S. government through Dec. 3 and suspend a borrowing limit until end-2022. Senate Republicans however have vowed to block it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech, IG Group

– U.S. earnings: Nike

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

Macy’s Stock Price Rallying After Delivering Huge Earnings

The shares of Macy’s are rallying today after the company reported better-than-expected earnings in the second quarter of the fiscal year.

Macy’s Q2 Earnings Trump Estimates

Leading departmental store, Macy’s, reported its second-quarter earnings today and the company performed above expectations. According to the company’s report, the adjusted earnings per share in the second quarter was $1.29, significantly higher than the 19 cents that were expected.

The revenue was also above the analysts’ estimation. Macy’s revenue in the second quarter of 2021 was $5.65 billion vs. $5.01 billion expected. The performance in the second quarter is a continuation of what was experienced, with the Coronavirus restrictions easing in several parts of the United States.

CEO Jeff Gennette pointed out that the company has rolled out numerous new strategies, and they have helped them attract younger people to the stores. Macy’s said it recorded 5 million new customers in Q2, with 41% of them coming through the digital channels.

Macy’s net income during the second quarter was $345 million, or $1.08 per share, compared with a net loss of $431 million, or $1.39 per share, in the same quarter last year. The net sales of $5.65 billion are nearly 90% higher than the $3.56 billion recorded a year earlier.

E-commerce remains a challenging area for Macy’s, with sales in this area down 6% from last year. Thanks to this latest performance, Macy’s has raised its outlook for net sales this year. The company expects to make between $23.55 billion and $23.95 billion, up from the previous of between $21.73 billion to $22.23 billion.

The full-year earnings per share expectations have been increased to the range of $3.41 to $3.75 a share, up from previous guidance of $1.71 to $2.12 per share.

Macy’s Stock Price Up By 15%

Macy’s stock price has been rallying at Thursday’s pre-market trading session. M is up by 15% over the past few hours, with the market reacting to the company’s latest earnings report. At the time of this report, Macy’s stock price is at $20.

M stock chart. Source: FXEMPIRE

Year-to-date, M is one of the best-performing stocks in the market as it is up by nearly 100%. Macy’s began 2021 trading at $11 per share, but it is now trading close to $21.

Macy’s Boosts Forecasts as Vaccines Encourage in-Store Shopping

By Nivedita Balu

The New York-based retailer’s shares gained about 2% after a surprise first-quarter profit and comparable sales that beat Wall Street estimates.

“As the weather warms up and vaccines are more readily available, customers are feeling increasingly confident to get dressed up and venture outside. They’re also starting to attend events again,” Chief Executive Officer Jeff Gennette told analysts.

Consumers, flush with cash from additional stimulus, are also splurging on expensive fragrances, shoes, fine jewelry and dresses, Macy’s said, as pajamas and t-shirts give way to more formal wear.

With more Americans readying to travel as restrictions also ease, summer travel essentials including sandals, swimsuits and luggage are also in demand.

Macy’s forecast adjusted earnings per share between $1.71 and $2.12 for 2021, compared with its earlier outlook of 40 cents to 90 cents.

It expects sales between $21.73 billion and $22.23 billion, much higher than the $19.75 billion to $20.75 billion it forecast earlier.

“We don’t see this as a short-term pop. There are pent-up demand opportunities,” Gennette said.

The owner of Bloomingdale’s and beauty store chain Bluemercury, however, was cautious on tourist spending.

International tourism, which historically has made up for 4% of Macy’s and Bloomingdale’s business, is not expected to improve until next year, Gennette said.

“(Macy’s) has improved in very difficult times. In many ways Macy’s is in much better shape than pre-pandemic times,” said Craig Johnson, president at retail consultancy Customer Growth Partners.

The company earned 39 cents per share on an adjusted basis, compared with expectations of a 41-cent loss, according to IBES data from Refinitiv.

(Reporting by Nivedita Balu in Bengaluru;Editing by Sriraj Kalluvila and Vinay Dwivedi)

Macy’s Shares Gain as Earnings Top Estimates

Macy’s Inc, an American department store chain founded by Xavier Warren in 1929, reported better-than-expected earnings in the fourth quarter, largely driven by strong online sales as shoppers purchased everything from the comfort of their homes amid the COVID-19 pandemic, sending its shares up about 3% on Tuesday.

The fashion retailer said its diluted earnings per share of $0.50 and adjusted diluted earnings per share of $0.80 both exceeded the expectations for the quarter the company set in the fall. That was also higher than the market expectations for a profit of $0.05 per share.

Macy’s net sales declined about 19% to $6.78 billion in the fourth quarter; however, it came in well above the Wall Street estimates of $6.50 billion. Digital remained a growing and increasingly profitable platform.

Sales grew 21% over fourth quarter 2019, with digital penetration at 44% of net sales. Nearly 25% of Macy’s digital sales were fulfilled from stores, including curbside pickup and same-day delivery.

The U.S. premier omni-channel fashion retailers forecast sales in the range of $19.75 billion and $20.75 billion for 2021.

Macy’s shares, which slumped over 30% in 2020, rose over 37% so far this year. The stock traded about 3% higher at $15.69 on Tuesday.

Executive Comments

“We anticipate annual digital sales to reach $10 billion within the next three years, and that digital will become an even more profitable contributor to our business. Additionally, we exited the quarter with a lower cost base and a strong liquidity position, supported by a $3 billion asset-based lending facility that we have not drawn upon,” said Jeff Gennette, chairman and chief executive officer.

Macy’s Stock Price Forecast

Six analysts who offered stock ratings for Macy’s in the last three months forecast the average price in 12 months of $12.00 with a high forecast of $15.00 and a low forecast of $8.00.

The average price target represents a -22.78% decrease from the last price of $15.54. From those six analysts, two rated “Buy”, one rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $11 with a high of $22 under a bull scenario and $1 under the worst-case scenario. The firm gave an “Underweight” rating on the department store chain company’s stock.

Several other analysts have also updated their stock outlook. Macy’s had its target price increased by analysts at Telsey Advisory Group to $14 from $10. The brokerage currently has a “market perform” rating on the stock. Jefferies Financial Group upgraded shares of Macy’s from a “hold” rating to a “buy” rating and set a $14 target price. Credit Suisse Group upped their target price on shares of Macy’s from $6.00 to $7.00 and gave the company an “underperform” rating.

Analyst Comments

Macy’s continues to undergo core operating challenges, similar to peers in the department store space (eg. market share cessation to peers, falling store traffic, contracting margins, eCommerce disintermediation). Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

“Expense cuts (eg. headcount reduction), real estate monetization, and secondary growth initiatives are encouraging but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. We anticipate COVID related disruption accelerates market share loss to peers, especially to brands with owned eComm.”

Check out FX Empire’s earnings calendar

U.S. Market Wrap and Forecast for Friday

Major benchmarks sold off at the start of Thursday’s session while a congressional committee debated the implications of last month’s Gamestop Inc. (GME) frenzy. Risk-adverse instruments surged to monthly highs in the first half of the day, shaking out a few weak hands. An afternoon bounce pushed a few points above opening prints but SP-500 Volatility Index (VIX) held firmly in the green into the closing bell.

Mean Reversion

Traders sold many stocks that had rallied to unsustainable price levels, including Tesla Inc. (TSLA), squaring positions ahead of Friday’s options expiration finale. GME and its companions sold off as well, hitting 4-week lows. High yield plays perked up, attracting buying interest for the first time in 2021.  FAANG stocks ticked lower in unison, displaying none of the leadership that generated impressive 2020 returns.

Marriott International (MAR) closed higher despite a 59% year-over-year revenue decline, with executives hoping vaccines translate into a booking resurgence and travel season that keeps hotels from going bankrupt. Fauci said vaccines were reducing COVID-19 infections this morning, which we assumed long before he reached that conclusion. That now needs to translate into baby boomers leaving their caves and spending billions in their favorite destinations this summer.

Friday Expiration

Friday options expiration is often sloppy and uncomfortable, with position squaring more important to the ticker tape than short-term price patterns. Limited exposure makes sense during this period but stocks that have sold off into popular strikes could offer good trade entries into Monday’s options hangover. Twitter Inc. (TWTR) comes to mind in this regard, dropping three or four points this week before bouncing just above the 70 strike.

Home Depot Inc. (HD) highlights next week’s earnings calendar, with the Dow component grinding through the sixth month of a narrow range price pattern. Macy’s Inc. (M) is also on the schedule, shining a light on one of the fallen angels of last month’s Gamestop squeeze. Sadly, M and the mall anchor group have no future, beyond the lipstick put on the pig in recent months, because e-commerce is an unstoppable monster.

For a look at all of today’s economic events, check out our economic calendar.

Thanksgiving Week: Retailers’ Roaring Return?

Typically, Black Friday sales are accompanied by scenes of bargain-hunters camping outside popular retail outlets, braving the cold, only to bum-rush the store once it’s open. Sometimes, overly eager shoppers literally bust down doors and even get into fist fights over the best deals.

This year, things are set to be very different, due to the Covid-19 resurgence across America.

Instead of the usual frenzy at the physical stores, the stampede for bargains has been very apparent in the stock markets. Investors have made a beeline towards companies that had been beaten down by the pandemic, as they price in a return to in-person shopping, enabled by a Covid-19 vaccine.

Such a narrative has sent stocks in mall-based retailers surging on Monday:

  • Macy’s soared 15 percent (month-to-date gains: 67.63 percent). Macy had also reported a better-than-expected Q3 performance last week.

  • American Eagle Outfitters jumped 7.32 percent (month-to-date gains: 32.6 percent). The company is set to release its Q3 earnings after US markets close on Tuesday.

  • Gap advanced 6.93 percent (month-to-date gains: 33.98 percent). Gap is also set to unveil its quarterly results after US markets close on November 24th.

  • Urban Outfitters climbed 4.44 percent (month-to-date gains: 41.72 percent), before announcing after markets closed on Monday that its Q3 earnings-per-share exceeded estimates.

Overall, the S&P 1500 Apparel Retail Index has surged by nearly 86 percent since its March low, and is now a mere 2.14 percent away from its highest ever closing price, posted on February 20th this year. Still with the stocks of many of these so-called “nonessential retailers” now reaching overbought territory, perhaps a pullback can be expected in the near-term.

Pandemic-fueled bonanza

This wave of optimism has been fanned by a report from the National Retail Federation, which expects US holiday sales to post a 3.6 to 5.2 percent growth compared to 2019’s US$729.1 billion that was spent during the year-end shopping season. The industry’s leading trade group expects a “strong finish” to what has been a tumultuous 2020, given that Americans who were not able to spend on other items such as vacations and in-person entertainment (sporting events, movies, etc.) will instead pour between US$755.3 billion to US$766.7 billion into their year-end shopping spree. Such an outlook augurs well for the overall US retail sales figure, which could only muster a mere 0.3 percent growth in October compared to the month prior.

Retailers have to deliver results

However, execution risks remain. It remains to be seen how well these retailers can handle the incoming swarm of orders, be it for curbside pickup or direct shipping. Amazon has already braced itself by hiring over 25,000 more workers for its warehouses this year, while adding an extra 100,000 seasonal workers to handle the expected tsunami of online orders.

And the expected rebound in footfall isn’t assured. The pandemic may have left longer-lasting scars, potentially enforcing a lasting shift in shopping habits. Consumers may feel a lot more reluctant to return to in-person shopping and may have grown accustomed to buying items online. And with a spate of job losses in the US economy, with weekly jobless claims still over three times more than pre-pandemic levels while the unemployment rate remains close to seven percent, American consumers’ purchasing power may need more time to recover.

“Dark Winter” ahead?

Still, a fresh round of US fiscal stimulus by the incoming Biden administration could help dampen some of these downside risks on US retail activity. Otherwise, once the year-end shopping spree fades, these retailers might have been to brave a long, cold winter before they can welcome warm bodies back into their stores once more, to justify the eye-popping gains in their shares of late.

Written on 24/11/20 08:00 GMT by Han Tan, Market Analyst at FXTM

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Macy’s Shares Rise on Strong Digital Sales in Q2; Target Price $16 in Best-Case

Macy’s Inc, an American department store chain founded by Xavier Warren in 1929, reported a lower-than-anticipated decline in net sales but digital sales remained strong, growing 53% in the second quarter as shoppers purchased everything from the comfort of their homes amid COVID-19 pandemic, sending its shares up about 6% in pre-market trading on Wednesday.

The fashion retailer said its net sales slumped 35.8% to $3.56 billion but beat market expectations of $3.48 billion. However, digital sales remained strong, growing 53% over second-quarter of 2019. Digital sales penetrated at 54% of the total owned comparable sales.

Macy’s delivered a gross margin of 23.6%, an improvement of approximately 650 basis points from first quarter 2020 due to improved retail margins from the sale of clearance merchandise.

Macy’s reported a net loss of $431 million, or $1.39 per share, in Q2, worse than a profit of $86 million, or 28 cents per share, seen a year earlier.

The company said it withdrew its 2020 sales and earnings guidance and is not currently providing an updated outlook due to ongoing uncertainty as a result of the COVID-19 pandemic.

Macy’s shares rose about 6% to $7.41 in pre-market trading on Wednesday. However, the stock is down about 60% so far this year.

Executive comments

“We are encouraged by our second-quarter performance; however, we continue to approach the back half of the year conservatively. Our immediate priority is successfully executing Holiday 2020. We are also focused on laying the groundwork for 2021 and beyond,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc.

We plan to invest in fashion, digital and omnichannel, work with agility, and galvanize the resources of the company to serve our customers and move the Macy’s, Inc. business forward,” Gennette added.

Macy’s stock forecast

Seven analysts forecast the average price in 12 months at $5.57 with a high forecast of $9.00 and a low forecast of $3.00. The average price target represents a -20.54% decrease from the last price of $7.01. From those seven analysts, none rated “Buy”, three rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $5 with a high of $16 under a bull-case scenario and $1 under the worst-case scenario. UBS downgraded to sell from neutral; lowered their target price to $3 from $6.

Other equity analysts also recently updated their stock outlook. Deutsche Bank raised their target price to $6 from $5, Jefferies upped their stock price forecast to $6 from $5, Cowen and Company increased their price objective to $9 from $7 and Credit Suisse raised it to $6 from $4.50.

Analyst view

“Macy’s continues to undergo core operating challenges, similar to peers in the department store space (eg. market share cessation to peers, falling store traffic, contracting margins, eCommerce disintermediation). Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

“Expense cuts (eg. headcount reduction), real estate monetization, and secondary growth initiatives are encouraging, but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. In the event of a 2020 recession, Macy’s likely struggles to survive as it is currently operating,” she added.

Upside and Downside risks

Upside: 1) A return to positive store-only comps while maintaining flow through. 2) Strategic initiatives help drive store traffic. 3) Improved merchandising and supply chain management leads to gross margin expansion. 4) Share buybacks recommence. 5) CECL has no impact to credit profit share – highlighted Morgan Stanley.

Downside: 1) Store-only comps deceleration. 2) CECL has a larger impact than anticipated. 3) 2020 coronavirus/recession impact more severe than anticipated.

Macy’s Sales Slump Over 40% in Q1; Doesn’t Anticipate Another Full Shutdown

Macy’s Inc, an American department store chain founded by Xavier Warren in 1929, posted a $3.58 billion loss as the coronavirus-induced lockdown hit its first-quarter sales, leading to a record $3 billion impairment charge.

The fashion retailer, who also owns Bloomingdale’s reported that first-quarter sales through May 2 almost halved to $3.02 billion. Additionally, it reported a net loss of $11.53 per share, compared with a profit of 44 cents a year ago.

However, the company expects Q2 comparable sales to improve by nearly 6-7 percentage points, as against a 35% fall in the prior quarter, Macy’s said. The company reported $1.52 billion in net cash and cash equivalents, combined with $18.58 billion in total liabilities and shareholders’ equity.

“The first quarter of 2020 was challenging for the country, the industry and Macy’s, Inc. While our stores are re-opened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year. We do not anticipate another full shutdown, but we are staying flexible and are prepared to address increases in cases on a regional level,” Jeff Gennette, chairman and chief executive officer of Macy’s, Inc said in a press release.

“We are meeting our customers how and where they are shopping and have enhanced our fulfilment options and health precautions to ensure a safe and welcoming shopping experience. While we continue to see challenges ahead, we’ve taken the necessary actions to stabilize our business and give us financial flexibility. We are confident we have the right strategy and plans in place to navigate the shifting retail landscape,” he added.

Following this announcement, Macy’s shares fell over 3% in premarket trading.

Macy’s Inc outlook and price target

Eight analysts forecast the average price in 12 months at $5.64 with a high forecast of $9.00 and a low forecast of $3.00. The average price target represents a -19.54% decrease from the last price of $7.01, according to Tipranks. From those eight, nice rated ‘Buy’, three analysts rated ‘Hold’ and five rated ‘Sell’.

Cowen and Company raised target price to $9 from $7 and Credit Suisse raised price target to $6 from $4.5. Morgan Stanley target price is $6 with a high of $19 under a bull scenario and $1 under the worst-case scenario.

Analyst comment

“Macy’s continues to undergo core operating challenges, similar to peers in the department store space. Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Expense cuts, real estate monetization, and secondary growth initiatives are encouraging, but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. In the event of a 2020 recession, Macy’s likely struggles to survive as it is currently operating,” he added.