), one of the leading department store retailers in the United
States, posted its second-quarter 2012 results on August 8. Here we
will discuss the company's scorecard based on the recent earnings
announcement, subsequent estimate revisions by analysts as well as
the Zacks Rank and long-term recommendation for the stock.
Last Quarter Synopsis
The company's relentless endeavors to keep itself on the growth
trajectory have paid off in an economy, which is still
The quarterly earnings of 67 cents a share beat the Zacks
Consensus Estimate of 64 cents, and soared 22% from 55 cents earned
in the prior-year quarter on the back of My Macy's localization
initiatives, omnichannel integration, robust online sales and
effective cost management.
The Cincinnati, Ohio-based Macy's reported total sales growth of
3% to $6,118 million in the quarter from $5,939 million in the
year-ago period, and comfortably surpassed the Zacks Consensus
Estimate of $6,100 million. Comparable-store sales for the quarter
Online sales, including sales from macys.com and
bloomingdales.com, continued to show growth momentum. For the
quarter, online sales were up 36.1%. Online sales favorably
impacted comparable-store sales by 1.7%. The company seeks to
expand both Macy's and Bloomingdale's brands online.
Buoyed by Macy's healthy results, management now expects fiscal
2012 earnings between $3.30 and $3.35, up from a range of $3.25 to
$3.30 per share forecasted earlier. However, comparable-store sales
growth forecast of about 3.7% for fiscal 2012 was kept
(Read our full coverage on this earnings report:
Macy's Beats, Ups Outlook
Agreement of Estimate Revisions
In the last 30 days, 2 out of 15 analysts covering the stock
raised their estimates, whereas 8 analysts lowered the same for the
third quarter of 2012. For the fourth quarter, 8 analysts made
upward revisions, whereas 2 analysts trimmed their estimates.
For fiscal 2012 and 2013, 7 and 10 analysts, respectively,
revised their estimates upward in the last 30 days. None made
What Drives Estimate Revisions
Clearly, a positive sentiment is palpable among most of the
analysts, who remain optimistic on Macy's performance.
Better-than-expected results and upbeat earnings guidance impressed
the analysts, who went on to revise their estimates upwards to
better align with management's guidance range.
However, some of the analysts remained concerned about
management's forecast of soft sales growth, lower credit income and
an absence of any favorable tax settlements in the third quarter.
Further, management hinted of lower earnings per share during the
third quarter when compared with the prior-year period.
Magnitude of Estimate Revisions
The magnitude of estimate revisions by the analysts is clearly
reflected through changes in the Zacks Consensus Estimates.
The Zacks Consensus Estimate for the third quarter of 2012 has
moved down by a penny to 27 cents a share in the last 30 days. The
Zacks Consensus Estimate for the fourth quarter dropped by 14 cents
For fiscal 2012, the Zacks Consensus Estimate jumped 4 cents to
$3.38 in the last 30 days. For fiscal 2013, the Zacks Consensus
Estimate increased by 6 cents to $3.84.
The U.S. economy is yet to recover. Amid such a scenario, Macy's
has been moving on an upbeat note. The company's sound fundamentals
across its Macy's and Bloomingdale's business, is mirrored through
strong second quarter results and management believes that it will
sustain the rhythm in 2012, as the year presents enormous
opportunity to enhance market share.
In an attempt to increase sales, profitability and cash flows,
the company has been taking steps such as integration of
operations, consolidation of divisions, customer-centric
localization initiatives, as well as developing e-commerce business
and online order fulfillment centers. Moreover, Macy's continues to
focus on price optimization, inventory management and merchandise
planning to drive traffic.
However, the company's expansion in regions where it already
serves could cannibalize its sales performance and bring down
traffic counts at its existing stores in these areas. Consequently,
this may have a negative impact on the company's overall
performance. Moreover, sluggish economic recovery and erratic
consumer behavior also remain the causes for concern.
Macy's department stores sell a wide range of merchandises. Its
products include men's, women's, and children's apparel and
accessories, cosmetics, home furnishings and other consumer
Macy's, which competes with
J. C. Penney Company Inc.
), currently operates approximately 840 department stores in 45
states, the District of Columbia, Guam and Puerto Rico.
Currently, we have a long-term Neutral recommendation on the
stock. Moreover, Macy's holds a Zacks #3 Rank that translates into
a short-term Hold rating.
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