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Macy's (M)
Macy's Profit Falls But Beats Wall Street Expectations
The recent economic downturn has been devastating to the retail business sector. Even retail juggernaut Macy's has been impacted by the floundering economy. Macy's Incorporated (M: Charts, News, Offers) watched its net profit fall from $73 million a year ago to $7 million for the quarter while sales tumbled 9.7%. Despite this drastic drop in profit, Macy's still managed to beat out Wall Street expectations. How did Macy's orchestrate its better-than-expected quarterly performance? What are the future implications of this quarter?
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| Stock Analysis |
Macy's has worked very hard to combat its declining sales. Macy's Incorporated has been concentrating on intensifying its cost cutting efforts and improving inventory forecasting. Macy's has really reduced expenses with the implementation of its new consolidation program. The retail giant's consolidation operation has not only streamlined the overall decision-making process but its relationships with vendors. In addition, Macy's has found significant success with its new My Macy's initiative. The My Macy's installment is a new merchandising strategy that focuses on localizing the inventory and style offerings based on the store's location. The idea being that a product offering tailored to the local demographic is more conducive to accurate inventory forecasting than a generic, nationwide inventory strategy. CEO Terry Lundgren commented that the My Macy stores are outperforming the other standard inventory locations. As a result, Macy's has decided to roll out the My Macy's program nationwide. Macy's appears to be heading in the right direction, but what is the final destination?
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Macy's Inc. is very optimistic about its recent quarter performance. In fact, the retail store icon is so pleased with how things have been going that it has decided to increase its yearly earnings outlook. Macy's announced that it will bump its projected earnings per share from 40 to 50 cents up to 70 cents to 80 cents for the year. However, Macy's does anticipate that same sales stores will still decline 5% to 6% throughout the second half of the year. Overall, Macy's Inc. seems confident that it will be able to build off the positive momentum that the My Macy's program has created as it moves forward with the fiscal year.
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Macy's appears to be in high spirits after this quarter's performance. Although the company saw its profit decline, it managed to beat out Wall Street expectations. Macy's organizational consolidation initiative has helped it streamline and cut operating costs. The consolidation efforts coupled with the phenomenal success of the My Macy's program seems to have laid a solid foundation for future performance. So much so that Macy's has increased its yearly outlook in response to its recent success. However, there has been outside speculation that Macy's earnings adjustment may have been slightly premature. Macy's Incorporated is hoping that its new My Macy's program will have it dressed for success in the near future.
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