We recently upgraded our long-term recommendation on Macy’s Inc.’s (M), one of the leading department store retailers in the United States, to Outperform with a price target of $28.00 following its second-quarter 2011 results. Earlier, we had a Neutral stance on the stock.
Macy’s constant focus on price optimization, inventory management, merchandise planning and private label offering positions it to drive traffic, meet customer-oriented demand and improve the in-store shopping experience.
We remain optimistic about the company’s customer-centric localization initiative called ‘My Macy’s’. The program aims at improving comparable-store sales and reducing operating expenses, with stores and merchandise assortments paying heed to local customer needs and preferences.
These helped the company to deliver better-than-expected second-quarter 2011 results on the heels of healthy sales, improved operating margin and effective cost management. The quarterly earnings of 55 cents a share outperformed the Zacks Consensus Estimate of 47 cents, and jumped 57.1% from 35 cents a share earned in the prior-year quarter.
Following the bullish results management raised its outlook. Macy’s now guides fiscal 2011 earnings in the range of $2.60 to $2.65 per share, up from $2.40 to $2.45 forecast earlier.
Macy’s reported a 7.3% rise in total sales to $5,939 million in the quarter from $5,537 million delivered in the prior-year period. Total revenue also came in well ahead of the Zacks Consensus Estimate of $5,881 million. Comparable-store sales for the quarter climbed 6.4% and fared better than the company’s projection of 6%.
Management now expects comparable-store sales growth between 4.8% and 5.1% for fiscal 2011, up from 4.8% previously projected.
Macy’s recently posted better-than-expected sales results for the four-week period ended August 27, 2011, despite the closing of 100 stores due to Hurricane Irene, which lowered comparable-store sales by 1.5%.
Cincinnati, Ohio-based Macy’s said that comparable-store sales for August 2011 rose 5%, same as the previous month and up 70 basis points from the prior-year period. Total sales for the month under review grew 4.9% to $1,716 million from $1,636 million in the same month last year.
Online sales, which include sales from macys.com and bloomingdales.com, continued to show a growth momentum in August soaring 35.5%.
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.
Macy’s is also seeking to expand both the Macy’s and Bloomingdale’s brands. Online sales, which include macys.com and bloomingdales.com, sustained their growth momentum, and were up 40.2% in the quarter, favorably impacting comparable-store sales by 1.2%.
Macy’s, which competes with J. C. Penney Company Inc. (JCP) and Dillard’s Inc. (DDS), currently operates approximately 850 department stores in 45 states, covering the District of Columbia, Guam and Puerto Rico.
Macy’s holds a Zacks #2 Rank, which translates into a short-term Buy rating.
DILLARDS INC-A (DDS): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
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