), one of the leading department store retailers in the United
States, recently posted better-than-expected fourth quarter and
fiscal 2011 results on the back of strong holiday season sales,
improved operating margin, and effective cost management. The
shares of Macy's jumped $1.51 or 4.2% to $37.76 during the
pre-market trading session.
The company exited fiscal 2011 with a bang, and we believe it
will sustain the same tempo in 2012. The company's relentless
endeavors to keep itself on the growth trajectory have paid off in
an economy, which is fraught with risks. Early hours store
openings, huge discounts, promotional activities, and free shipping
on online purchases, were enough to lure customers.
Let's Unveil the Picture
The quarterly earnings of $1.70 per share outperformed the Zacks
Consensus Estimate of $1.65, and rose 6.9% from $1.59 earned in the
prior-year quarter buoyed by My Macy's localization initiatives,
omnichannel integration and robust online sales. The company said
that fiscal 2011 earnings registered a growth of 36.5% to $2.88 per
share, and came ahead of Zacks Consensus Estimate of $2.82.
On a reported basis, including one-time items, the quarterly
earnings came in at $1.74 per share compared with $1.55 in the
year-ago quarter. For fiscal 2011, the company posted earnings of
$2.92 per share, up from $1.98 in 2010.
The Cincinnati, Ohio-based Macy's said that total sales grew
5.5% to $8,724 million in the quarter from $8,269 million in the
prior-year period, and comfortably surpassed the Zacks Consensus
Estimate of $8,696 million. Sales climbed 5.6% to $26,405 million
from $25,003 million for fiscal 2011, and outdid the Zacks
Consensus Estimate of $26,390 million.
Comparable-store sales for the fourth quarter and fiscal 2011
climbed 5.2% and 5.3%, respectively.
Online sales, which include sales from macys.com and
bloomingdales.com, continued to show growth momentum. For the
quarter and fiscal 2011, online sales were up 40% and 39.6%,
respectively. Online sales favorably impacted comparable-store
sales by 1.7% in the fourth quarter and 1.5% in fiscal 2011. The
company seeks to expand both Macy's and Bloomingdale's brands
Despite a 6.1% increase in cost of sales, gross profit in the
quarter climbed 4.7% to $3,573 million, aided by top-line growth.
However, Macy's notified that gross profit margin shriveled 30
basis points to 41%. Adjusted operating income jumped 7.7% to
$1,259 million, whereas operating margin increased 30 basis points
Macy's, during fiscal 2011, opened four stores and shuttered 12
outlets. The company now plans to open new Macy's locations in Salt
Lake City and Greendale as well as five new Bloomingdale's Outlet
stores in fiscal 2012.
Other Financial Aspects
Macy's ended fiscal 2011 with cash and cash equivalents of
$2,827 million, long-term debt of $6,655 million, reflecting a
debt-to-capitalization ratio of 52.9% and shareholders' equity of
$5,933 million. During fiscal 2011, the company repaid debt of $454
The company during the quarter issued $800 million in new debt,
and expects to repay approximately $790 million in the first half
of fiscal 2012.
Macy's has been actively managing its cash flows, returning much
of its free cash to shareholders via dividends or share repurchase
activity, while maintaining a healthy balance sheet and credit
ratios that are necessary for an investment-grade rating. The share
repurchases and dividend increasing strategies not only enhance
shareholders' return but also raise the market value of the
During fiscal 2011, the company paid dividend of $148 million,
and repurchased approximately 16.4 million shares for a total
amount of about $500 million. The company bought back approximately
8.2 million shares aggregating approximately $279 million in the
fourth quarter. The company at its disposal had approximately
$1,352 million of share repurchase authorization as of January 28,
Macy's generated net cash flow of $2,093 million from operating
activities in fiscal 2011 compared with $1,506 million in the prior
Looking at Guidance
Macy's has guided fiscal 2012 earnings in the range of $3.25 to
$3.30 per share, ahead of the current Zacks Consensus Estimate of
$3.23. As a result, we could witness an upswing in the current
Zacks Consensus Estimates in the upcoming days with analysts
revising their estimates to better align with management's guidance
Macy's now expects comparable-store sales growth of about 3.5%
for fiscal 2012, and anticipates capital expenditures of
approximately $850 million for the year.
The U.S. economy is still not out of the woods. Amid such an
environment, Macy's has been moving on and keeping its upbeat
The company's sound fundamentals across its Macy's and
Bloomingdale's business, is mirrored through strong fourth quarter
results and management believes that it will sustain the rhythm in
2012, as the year present enormous opportunity to enhance market
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.
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 Outperform rating on the stock.
Moreover, Macy's holds a Zacks #1 Rank that translates into a
short-term 'Strong Buy' rating, and correlates with our long-term
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