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Why Macy's (M) May Not be a Good Pick for Your Portfolio

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Shares of Macy's, Inc.M , the department store retailer, have been plunging. Year to date, this Zacks Rank #5 (Strong Sell) stock has nosedived approximately 43%. Moreover, shares have dropped roughly 8% following its last earnings release on Nov 11, and also touched a 52-week low of $36.68 last Friday. It is evident that Macy's is no longer a favorite pick for investors. Let's delve a little deeper to find out the reasons.

Macy's Inc. (M) Stock Price - 30 Days | FindTheCompany

After witnessing negative earnings surprises in the first two quarters of fiscal 2015, Macy's made a comeback in the third quarter, delivering better-than-expected bottom-line results. However, the bottom line declined 8.2% year over year to 56 cents per share.

Moreover, a look at Macy's top-line performance unveils that the company posted weaker-than-expected sales in the last eight quarters. In the recently concluded quarter, Macy's generated net sales of $5,874 million that fell 5.2% year over year and missed the Zacks Consensus Estimate of $6,151 million.

Subdued consumer demand, primarily in the apparel and accessory categories, and lower spending by international tourists due to a stronger dollar, dampened the company's performance. Management now expects total sales for fiscal 2015 to decline 2.7%-3.1%, compared with its previous guidance of a 1% decrease. Management also lowered its fiscal 2015 earnings guidance to a band of $4.20-$4.30 per share from $4.70-$4.80 projected earlier.

Following Macy's discouraging performance and dull outlook, the Zacks Consensus Estimate witnessed a downtrend. Analysts polled by Zacks are now less constructive on the stock's future performance. Over the past 60 days, the Zacks Consensus Estimate of $4.24 and $4.07 per share for fiscal 2015 and fiscal 2016 has declined 9.2% and 12.7%, respectively. Moreover, the Zacks Consensus Estimate for the fourth quarter has plummeted 14.7% to $2.55 over the same time frame.

Nevertheless, Macy's has undertaken initiatives - Macy's Backstage off-price business, new loyalty rewards program and expansion of Bluemercury - to augment sales and profitability. Moreover, the company is entering into deals and collaborations to expand its operations. However, with its share price plunging and estimates witnessing downward revisions, it would not be prudent to keep this stock in your portfolio at least for the time being.

Stocks to Consider

Investors interested in the retail space may consider better-ranked stocks such as American Eagle Outfitters Inc. AEO , sporting a Zacks Rank #1 (Strong Buy), J. C. Penney Company, Inc. JCP and Foot Locker, Inc. FL , both carrying a Zacks Rank #2 (Buy).

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MACYS INC (M): Free Stock Analysis Report

PENNEY (JC) INC (JCP): Free Stock Analysis Report

AMER EAGLE OUTF (AEO): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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