On Wednesday, CFRA maintained a Hold rating on Macy's (NYSE:M) but reduced the stock's price target from $19.00 to $17.00. The adjustment reflects a mix of challenges and improvements within the company. The new price target is based on a forward P/E multiple of 6.1x, which is slightly above Macy's three-year average of 5.7x. This decision comes amid the analyst's perspective of persistent long-term difficulties facing department stores, balanced by Macy's stronger balance sheet and enhanced inventory management.
Macy's reported a normalized second-quarter earnings per share (EPS) of $0.53, surpassing consensus estimates by $0.24, despite revenues falling short at $4.9 billion, which is $108 million below expectations. The company's second-quarter performance revealed varying results across its brands, with Macy's net sales dropping by 4.4% year-over-year, Bloomingdale's seeing a marginal decline of 0.2%, and Bluemercury experiencing a 1.7% increase.
The company's gross margin saw a notable improvement, expanding by 240 basis points year-over-year to 40.5%. This was attributed to reduced discounting, lower delivery costs, and favorable shortage outcomes. Despite the mixed financial results, Macy's has revised its net sales guidance to $22.25 billion at the midpoint, while maintaining its EPS guidance.
CFRA's neutral stance on Macy's shares remains unchanged. The firm acknowledges the low valuation of the company's stock but also notes the ongoing decline in the department store sector, which continues to pose challenges for the retailer.
Macy's has seen significant developments in its financial outlook and strategic direction. Citi has revised Macy's stock price target down to $17, maintaining a neutral stance, while TD Cowen and Evercore ISI have adjusted their price targets to $19 and $17 respectively, both retaining their hold ratings.
The retailer reported strong Q1 results with net sales of $4.8 billion and an adjusted EPS of $0.27, exceeding expectations. As a result, Macy's raised its EPS guidance for fiscal year 2024 to a range of $2.55 to $2.90. Despite this, Macy's adjusted the gross margin forecast for the fiscal year downward, indicating a more conservative expectation for profit margins.
Furthermore, Macy's has appointed Keith Credendino as the new Chief Information Officer, succeeding Laura Miller. This move is part of the company's ongoing strategic efforts to improve its customer experience and modernize its operations.
On the retail front, U.S. retailers, including Macy's, are accelerating their holiday merchandise imports in anticipation of potential labor strikes and ongoing shipping disruptions. The National Retail Federation, which includes Macy's among its executive committee, anticipates strong import levels to continue through August.
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