Macy's lifts forecast, says 'every week was good' in first quarter

Andrew Cummings
May 16, 2018

Macy's Inc (NYSE:M) stock was on the rise Wednesday following the release of its earnings report for the first quarter of 2018. The company reported $2.82 EPS for the quarter, topping analysts' consensus estimates of $2.71 by $0.11. "While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business". The shares rose by as much as 9% Wednesday and still were up by over 6% by mid-morning. She thinks Macy's needs to close more stores than it already has and may have made the most it can from real estate sales.

"Our first quarter performance reflects solid execution of our North Star Strategy, including merchandising and marketing activities". In particular, we're interested in following the recovery now being seen at Macy's as sales continue to rise. Taken together, these positive factors give us confidence to raise both our sales and earnings guidance for the fiscal year.

"The second quarter is going to be very telling", said Marshal Cohen, chief industry analyst at NPD Group, who saw Macy's benefiting from an early Easter, in addition to the shift in its promotional program.

Net sales rose 3.6% to $5.54 billion in the quarter.

The quarterly results marked a turnaround from the declines that Macy's has been clocking on a regular basis for the past few years, as the company has shed stores and employees in an effort to stabilize.

The real test of what Macy's is up to could come next quarter. There were no impairment and other costs in the first quarter of 2017.

The company also saw a boost from global tourism but said it would be ending its joint venture with Fung Retailing Limited in China.

Net cash offered by operating activities was $322 million in the first quarter of 2018, contrast to $237 million in the first quarter past year. The new initiative allows customers to scan a product using their Macy's app, pay with their Macy's credit card, then visit a dedicated counter to remove security tags before they can exit the store.

Bloomingdale's and Blue Mercury, the company's higher-end subsidiaries, are performing well, as is the off-price concept launched in a number of Macy's stores, called Backstage.

Macy's also ended with Chinese joint venture with Fung Retailing Limited but will remain active on Alibaba's (BABA) TMall, as well as social media channels. "The winning formula for [Macy's] is a healthy brick-and-mortar business, robust e-commerce and a great mobile experience".

The company now expects adjusted earnings per diluted share of $3.75 to $3.95 in fiscal 2018. The sales of the store got an increase of 4.2 percent compared to the expected 1.4 percent.

Maybe Macy's Inc. wasn't just coasting on the holiday spirit after all. Comp sales on an owned plus licensed basis are seen rising 1%-2%.

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