What Macy's Got Right in Q1

Darnell Taylor
May 17, 2018

Net income for the quarter rose from $78 million a year ago (1.5 percent of sales) to $139 million (or 2.5 percent of sales) in the reported quarter. The company's stock has jumped more than 9% today, as of this writing.

In the furniture department, Macy's has been testing AR/VR in three stores and plans to roll it out to 60 more locations.

Macy's (NYSE:M) last released its quarterly earnings results on Tuesday, February 27th. It's also testing more curated merchandise displays and localized marketing. He said results are improving at its stores, coupled with robust online and mobile growth.

Chief Executive Jeff Gennette said in prepared remarks that Macy's "saw continued healthy consumer spending and significant improvements in worldwide tourism".

The retailer once again posted double-digit sales growth from digital sales, thanks in part to improvements the company has made to its website and app. "Heading into the second quarter, we are intensely focused on laying the foundation for our 2018 strategic initiatives to support improved performance in the back half of the year", Gennette added. The spending gains were spread across most retail categories, especially big increases at furniture and clothing stores. In fact, it's been a great year to be a department-store investors, as Kohl's (KSS) and Dillard's (DDS) have gained 16.8% and 18.3%, respectively, and even Nordstrom (JWN) has gained 6%, despite numerous setbacks in its hopes to go private.

But while the United States job market is thriving and workers' paychecks are benefiting from tax cuts, consumer spending was actually down for the first two months of the year and only increased in March and April.

As per Neil Saunders of GlobalData Retail, "After a good holiday season, there was a question as to whether Macy's could continue to deliver a recovery". (NYSE:M) by 10.4% in the first quarter, according to its most recent filing with the Securities and Exchange Commission. It allows shoppers to rack up points on purchases that can them be redeemed at Macy's stores or online.

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Macy's, Inc.'s operating income for the first quarter of 2018 totaled $238 million, or 4.3 percent of sales, contrast to $219 million, or 4.1 percent of sales, for the first quarter of 2017. The company reported $0.42 earnings per share for the quarter, beating analysts' consensus estimates of $0.35 by $0.07, Bloomberg Earnings reports.

Excluding impairment and other one-time costs, Macy's earned $0.48 per share, $0.11 higher compared with what analysts had anticipated.

Analysts polled by Zacks Investment Research were calling for earnings of 36 cents per share.

Still, Macy's stock is now up almost 30% this year, a clear sign that many on Wall Street also believe that Macy's is back on track. On the same-store sales front, Macy's crushed expectations with a 4.2 percent increase, well ahead of the expected 1.4 percent.

Macy's also raised its full-year forecast as it now expects EPS of $3.75 to $3.95, on revenue of $24.59 billion to $24.96 billion. Revenue is now expected to be down 1 percent to up 0.5 percent.

Outlook: Full-year EPS is now seen at $3.75-$3.95, up from a prior view of $3.55-$3.75, and better than consensus views for $3.64.

However, Macy's said it would remain active on Alibaba's social media channels and Tmall platform.

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