Macy's Reports Strong 1Q Earnings - Analyst Blog
Macy's Inc. ( M ) posted better-than-expected first-quarter fiscal 2013 results and maintained its guidance for fiscal 2013. The company's relentless endeavors to keep itself on the growth trajectory have paid off despite the lackluster economy.
The quarterly earnings of 55 cents a share surpassed the Zacks Consensus Estimate of 53 cents and surged 28% from 43 cents earned in the prior-year quarter on the back of My Macy's localization initiatives, omnichannel integration and effective cost management.
Total sales of the Cincinnati, Ohio-based Macy's grew 4% to $6,387 million in the quarter from $6,143 million in the year-ago period, and came ahead of the Zacks Consensus Estimate of $6,380 million. Comparable-store sales for the quarter climbed 3.8%.
Gross profit in the quarter rose 3.8% to $2,476 million, aided by top-line improvement, while gross profit margin remained flat at 38.8%. Operating income jumped 11.3% to $435 million, whereas operating margin expanded 40 basis points to 6.8%, reflecting lower SG&A expenses as a percentage of sales.
Other Financial Aspects
Macy's ended the quarter with cash and cash equivalents of $1,752 million, long-term debt of $6,797 million, reflecting a debt-to-capitalization ratio of 53.2% and shareholders' equity of $5,971 million.
Macy's has been actively managing its cash flow, 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 strategies to increase dividend not only enhance shareholders' return but raise the market value of the stock.
During the quarter, the company raised its quarterly dividend to 25 cents per share from 20 cents per share. The increased dividend will be paid on Jul 1, 2013, to shareholders of record on Jun 14, 2013.
Moreover, the company increased its share repurchase authorization by $1.5 billion, bringing the remaining authorization outstanding to $2.6 billion as of May 4, 2013. Since Aug 2011, the company has repurchased roughly $2.2 billion worth of shares through May 4, 2013.
Macy's generated net cash flow of $298 million from operating activities in the first quarter compared with $265 million in the year-ago period.
Strolling Through Guidance
Buoyed by healthy results, Macy's stood by its earlier guidance and projects fiscal 2013 earnings between $3.90 - $3.95. The company expects comparable-store sales growth of 3.5% for the current fiscal year.
The U.S. economy is yet to recover completely. Despite such a dismal scenario, Macy's has been progressing on an upbeat note. The company's sound fundamentals across its Macy's and Bloomingdale's business are mirrored through strong first-quarter results. Alongside, management believes that it will sustain the same momentum going forward.
In an attempt to increase sales, profitability and cash flow, the company has been taking steps such as integration of operations, consolidation of divisions, customer-centric localization initiatives, as well as developing its 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 count at its existing stores in these areas. Consequently, this may have a negative impact on the company's overall performance. Moreover, a sluggish economic recovery and erratic consumer behavior remain concerns.
Macy's department stores sell a wide range of merchandise. Its products include men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods.
During the first quarter, Macy's opened 1 new store in Victorville, Calif. and operates through 840 department stores across 45 states. Moreover, Macy's operates 12 Bloomingdale's Outlet stores.
Currently, Macy's holds a Zacks Rank #3 (Hold), and we could witness an upward revision in the rank in the coming days.
Other Stocks to Consider
Until any further upgrade in Macy's Zacks Rank, the other well performing stock in the non-food retail, wholesale sector includes Big 5 Sporting Goods Corp . ( BGFV ), which carries a Zacks Rank #1 (Strong Buy). The Gap, Inc . ( GPS ) and The Buckle, Inc . ( BKE ), both of which carry a Zacks Rank #2 (Buy) are also worth considering.
BIG 5 SPORTING (BGFV): Free Stock Analysis Report
BUCKLE INC (BKE): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
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