On Aug 19, we downgraded our long-term recommendation on Macy’s Inc. (M) to Neutral based on the company’s dismal second-quarter fiscal 2013 performance. The stock currently carries a Zacks Rank #3 (Hold).
Why the Downgrade?
Estimates for Macy’s have shown a downtrend since the company reported disappointing second-quarter results on Aug 14, 2013. The company posted lower-than-expected results as consumers’ cautious attitude toward making any discretionary purchases resulted in soft sales. Moreover, discounts offered hurt margins. As a result, management trimmed its comparable sales and earnings outlook.
The quarterly earnings of 72 cents a share missed the Zacks Consensus Estimate of 78 cents. However, the quarterly earnings registered year-over-year growth of 7.5%. Total sales edged down 0.8% to $6,066 million in the quarter but fell short of the Zacks Consensus Estimate of $6,246 million. Comparable-store sales for the quarter also slipped 0.8%.
Following soft results, Macy’s now anticipates comparable-store sales growth of 2% to 2.9% for fiscal 2013. Management now forecasts full-year earnings in the band of $3.80 to $3.90 per share. Earlier, the company had envisioned comps growth of 3.5% and earnings between $3.90 and $3.95 per share for the fiscal year.
Consequently, we are witnessing a fall in the Zacks Consensus Estimate, as analysts become less constructive on the stock’s future performance. The Zacks Consensus Estimate for fiscal 2013 fell by 2.5% to $3.85 and for fiscal 2014 it tumbled by 3.8% to $4.32 per share, over the past 30 days.
Going forward, management remains optimistic on capturing the back-to-school season opportunities with its fresh inventory along with My Macy's localization initiatives, omnichannel integration and Magic Selling.
Other Stocks that Warrant a Look
Other stocks worth considering in the retail sector include Citi Trends, Inc. (CTRN), Fortune Brands Home & Security, Inc. (FBHS) and Lumber Liquidators Holdings, Inc. (LL), all sporting a Zacks Rank #1 (Strong Buy).
Read the Full Research Report on M
Read the Full Research Report on CTRN
Read the Full Research Report on FBHS
Read the Full Research Report on LL
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