Macy's Shares Jump on Signs That a Turnaround Is Working

Marco Green
May 16, 2018

Shares of Macy's Inc. are up 10 percent in premarket trading. Its shares surged almost 9 percent Wednesday, and the stocks of other department store chains rose as well. The stock now has an average rating of "Hold" and a consensus target price of $26.63.

Net income attributable to Macy's shareholders rose to $139 million, or 45 cents per share, in the first quarter ended May 5, from $78 million, or 26 cents per share, a year earlier.

"The quarter was good every month - in fact, every week", Chief Financial Officer Karen Hoguet said on a call with analysts. California State Teachers Retirement System now owns 599,936 shares of the company's stock valued at $15,112,000 after acquiring an additional 42,796 shares during the last quarter. American International Group Inc. now owns 23,923,612 shares of the company's stock worth $602,636,000 after purchasing an additional 11,894,858 shares during the last quarter. Excluding a shift of Friends and Family from Q2 to Q1, same-store sales were up 1.7% on an owned plus licensed basis. Revenue was $5.5 billion vs. $5.4 billion expected, rising 3.6%.

On the call, Gennette attributed some of the gains to a 10 percent uptick in worldwide tourism spending, along with what he called "a very healthy inventory position", indicating that the retailer has made better merchandising decisions and relied less on discounting to sell through product. "The winning formula for Macy's, a healthy brick & mortar business, robust e-commerce and a great mobile experience". While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business. Macy's also said business got a lift from an increase in spending from worldwide tourists, the first time since 2014. Taken together, these positive factors give us confidence to raise both our sales and earnings guidance for the fiscal year. "Heading into the second quarter, we are intensely focused on laying the foundation for our 2018 planned programs to support improved performance in the back half of the year".

Estimates: A 50% rise in EPS to 36 cents on 1.7% sales growth to $5.43 billion, according to Zacks Investment Research. During the quarter, the company generated same store sales growth in the amount of 4.2%. The company beat on revenue and earnings while reporting a marked increase in same-store sales. Following the transaction, the director now directly owns 16,184 shares of the company's stock, valued at approximately $473,382.

First-quarter earnings are in for Macy's Inc (NYSE:M), and the retailer has unwrapped a pleasant surprise for investors. There were no impairment and other costs in the first quarter of 2017. J.C. Penney was up 2.5 percent, Kohl's rose 2 percent, Nordstrom, which reports its first-quarter earnings on Thursday, was up 1.5 percent and Target Corp was up 3.5 percent at around midday.

The company said it now expects adjusted profit of $3.75 to $3.95 per share for the year, up from a prior forecast of $3.55 to $3.75.

Net cash offered by operating activities was $322 million in the first quarter of 2018, contrast to $237 million in the first quarter previous year.

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