Macy's (M) Reports a Sour Second Quarter

Retail giant Macy's (M) recently disappointed investors, after posting a sour second quarter and a bleak forecast for the rest of the year. For its second quarter, Macy's earned $0.72 per share, up from $0.62 per share in the prior year quarter but coming short of the $0.78 that analysts had expected. Revenue declined 0.8% to $6.07 billion, also missing the consensus estimate of $6.26 billion. Macy's topped off that bad news with a same-store sales decline of 0.8%.

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For the full year, same-store sales are now expected to rise 2.0% to 2.9%, down from its previous forecast for 3.5% growth. Full-year earnings are expected to come in between $3.80 to $3.90 per share, a reduction from its previous forecast of $3.90 to $3.95 per share. Shares fell more than 5% through the end of last week. Macy's, which operates its namesake stores and Bloomingdales, is struggling with attracting shoppers with waning discretionary income in a rocky economic recovery. Although the housing and job markets have improved, the cost of living in the United States remains high, making many ordinary incomes insufficient to preserve the discretionary income that retailers like Macy's need to survive. CFO Karen Hoguet cited the macro weakness in the U.S. during the conference call. She stated, "We believe that much of our weakness is due to the health of the consumer, and to the fact that consumers seem to be choosing to make purchases in non-department store categories such as cars, housing and home improvement." On the bright side, Macy's stated that the back-to-school season, a critical season for department stores, was off to a promising start. However, teen apparel retailers such as Aeropostale (ARO) have already warned that the back-to-school season will be weaker than expected. Macy's stated that it had marked down its inventory substantially after a cooler spring, and that shoppers were responding positively to the lower prices, which should translate into stronger revenue growth during the third quarter. Shares of Macy's appear fundamentally attractive, at 10.6 times forward earnings with a 5-year PEG ratio of 0.94 -- indicating a fairly cheap valuation with substantial growth potential. However, the company's quarterly earnings have caused investors to doubt the strength of the retail sector, and weak earnings from Wal-Mart (WMT) and Nordstrom (JWN) last week also exacerbated those doubts. Macy's currently pays a quarterly dividend of $0.25 per share -- a 2.2% yield at current prices. Other News About M Macy's Sales Slip, Says Shoppers Wary to Spend Macy's top line suffers as shoppers cut back on spending. Macy's Misses Wall Street Estimates; Shares Tumble Macy's disappoints Wall Street. Other Stocks in the News Is This Healthcare Stock Underrated? Is there more to meets the eye with Perrigo? A Closer Look at the Controversial Market Growth of ADHD Treatments Are these ADHD treatments ethical? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 23, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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