Macy's Lifts Outlook After Solid First Quarter

Posted May 17, 2018

Macy's same-store sales on an owned basis grew 3.9%, and by 4.2% on an owned-plus-licensed basis, well above the FactSet consensus for a same-store sales increase of 0.7%. During the same quarter previous year, the company earned $2.02 EPS.

The department store chain m on Wednesday reported its strongest quarterly results in years as efforts to streamline assortments, emphasize the quality and presentation of merchandise rather than just focusing on sales events and more exclusive products paid off for Macy's.

As per the survey of the analysts, the expected earnings was 37 cents which actually rose to 48 cents.

Macy's raised its outlook for the fiscal year after a solid first quarter, signaling that the retailer's growth strategies seem to be taking hold after several downbeat quarters.

Macy's announced that it will end its joint venture with China's Fung Retailing Ltd., but will remain on Alibaba Group Holding Ltd.'s (BABA) Tmall platform and social media channels. "Today's results answer in the affirmative ... suggesting that Macy's recovery is gaining momentum". The company reported $0.42 earnings per share for the quarter, topping the Zacks' consensus estimate of $0.35 by $0.07.

Revenues rose roughly 3.6 percent to $5.5 billion, again surpassing analysts' expectations. Yet it was also driven by Macy's decision to shift its "Friends & Family" sale from the second-quarter to the first.

Looking to the full year, Macy's now expects earnings per share to fall within a range of $3.75 to $3.95, or 20 cents higher than a prior forecast.

Gennette said on an earnings call the company saw double-digit growth in its digital business and continued healthy consumer spending. Total sales are also predicted to rise up to 0.5% in 2018.

The unexpected spike in worldwide spending - up 10 percent from past year - marks only the second time since 2014 that spending by global shoppers has increased, the company said.

Deutsche Bank analysts also hit a sour note on the sector, writing in a report last week that department stores may already be overvalued by investors, as the "fundamental upside is limited" for the sector.

The Cincinnati-based company said it had profit of 45 cents per share.

Worldwide shoppers represent 5 percent to 10 percent of Macy's sales, according to Gordon Haskett analyst Chuck Grom.

On the corporate news front, Macy's revealed that it has come up with a new approach to handle its business in China. The department store retailer's operating income increased almost 8.7% year over year to $238 million, or about 4.3% of sales.

At its key tourism stores, including the Big Apple's Herald Square location, Macy's offers foreign shoppers a discount card, which they pick up in the stores at a visitor center.

On Wednesday, the CEO of the Macy's, Jeff Gennette, said, "Our best customer is responding well to the improvements we've made to her experience in our stores, on.com and through the Macy's app".