Macy’s (M) recently released its second-quarter fiscal 2024 earnings report, providing investors with a mixed bag of results. While the company exceeded earnings expectations, revenue fell short of estimates. The stock price has shown a slight positive trend since the last earnings report, but is it a signal of continued growth, or a prelude to a potential pullback?
Earnings Highlights:
* Macy’s reported adjusted earnings of 53 cents per share, surpassing the Zacks Consensus Estimate of 32 cents. This represents an increase from the 23 cents earned in the same period last year.
* Net sales came in at $4,937 million, missing the consensus estimate of $5,091 million and marking a 3.8% decline from the prior year.
* Comparable sales (comps) also took a hit, falling 4% on an owned basis and 3.3% on an owned-plus-licensed-plus-marketplace basis compared to the previous year.
* The company’s gross margin improved to 40.5%, up 240 basis points from the prior-year quarter, primarily driven by reduced discounting and favorable inventory management.
A Cautious Outlook:
Despite the positive earnings beat, Macy’s adjusted its annual outlook to reflect a more cautious consumer environment and heightened promotional activity. This new outlook anticipates a slight reduction in net sales, projected to be between $22.1-$22.4 billion, compared to the previously stated range of $22.3-$22.9 billion.
The company also revised its comparable owned-plus-licensed-plus-marketplace sales outlook, now forecasting a year-over-year decline of 0.5-2%. Adjusted earnings per share are projected to be $2.55-$2.90 for fiscal 2024, representing a decline from the $3.50 earned in the previous year.
Industry Comparison:
It’s worth comparing Macy’s performance to another prominent player in the Zacks Retail – Regional Department Stores industry, Dillard’s (DDS). Dillard’s has gained 6.1% over the past month, despite reporting a year-over-year revenue decline of 4.9% and a decline in earnings from $7.98 to $4.59 in the last reported quarter. However, Dillard’s has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions.
Analyst Sentiment:
Since the earnings release, analyst estimates for Macy’s have trended downward, leading to a net zero change in the consensus estimate. This downward trend, coupled with the cautious outlook, has contributed to Macy’s Zacks Rank #4 (Sell) rating, indicating an expectation of below-average stock performance in the coming months.
Looking Ahead:
Macy’s remains committed to its strategic initiatives aimed at enhancing the customer experience, but the company faces ongoing macroeconomic challenges. The company prioritizes maintaining a strong balance sheet, enhancing its gross margin, and controlling expenses to safeguard profitability amidst a challenging consumer environment. While the stock has shown a recent uptick, the cautious outlook and negative analyst sentiment suggest investors should approach Macy’s with caution in the near term.
