On Sep 27, we downgraded our long-term recommendation on
) to Underperform based on the company's dismal second-quarter
fiscal 2013 performance. The stock currently carries a Zacks Rank
Why the Downgrade?
Estimates for Macy's have shown a downtrend since the company
reported disappointing second-quarter results on Aug 14, 2013.
The company posted lower-than-expected results as consumers'
cautious attitude toward making any discretionary purchases
resulted in soft sales. Moreover, the offered discounts hurt
margins. As a result, management trimmed its comparable sales and
The quarterly earnings of 72 cents a share missed the Zacks
Consensus Estimate of 78 cents. However, the quarterly earnings
registered year-over-year growth of 7.5%. Total sales edged down
0.8% to $6,066 million in the quarter but fell short of the Zacks
Consensus Estimate of $6,246 million. Comparable-store sales for
the quarter also slipped 0.8%.
Following soft results, Macy's now anticipates
comparable-store sales growth of 2% to 2.9% for fiscal 2013.
Management now forecasts full-year earnings in the band of $3.80
to $3.90 per share. Earlier, the company had envisioned comps
growth of 3.5% and earnings between $3.90 and $3.95 per share for
the fiscal year.
Consequently, we are witnessing a fall in the Zacks Consensus
Estimate, as analysts become less constructive on the stock's
future performance. The Zacks Consensus Estimate for fiscal 2013
fell by 3% to $3.83 and for fiscal 2014 it tumbled by 4.2% to
$4.30 per share, over the past 60 days.
Going forward, management remained optimistic of capturing
incremental sales opportunities with its fresh inventory along
with My Macy's localization initiatives, omnichannel integration
and Magic Selling. However, we would prefer to wait and see if
the efforts show some positive results.
Other Stocks That Warrant a Look
Other stocks worth considering in the retail sector include
Citi Trends, Inc.
Lumber Liquidators Holdings, Inc.
) both sporting a Zacks Rank #1 (Strong Buy), while
Fortune Brands Home & Security, Inc.
) holds a Zacks Rank #2 (Buy).
CITI TRENDS INC (CTRN): Free Stock Analysis
FORTUNE BRD H&S (FBHS): Free Stock Analysis
LUMBER LIQUIDAT (LL): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
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