On Tuesday, Telsey Advisory Group maintained a Market Perform rating on Macy's (NYSE:M), with a steady price target of $17.00. The firm's commentary highlighted the retail giant's unexpected announcement to delay its earnings report due to an accounting irregularity.
Despite this, sales results matched previous consensus expectations, and Macy's has shown positive momentum, particularly in the beauty and luxury sectors. The performance of Macy's First 50 stores, which are outpacing the rest of the fleet, suggests a promising outlook for upcoming renovations and new store openings.
Macy's has seen November comparable store sales pick up pace, surpassing third-quarter figures. The company's strategic plan, dubbed the Bold New Chapter and led by CEO Tony Spring, aims to shut down 150 stores, expand luxury store count by 20%, and generate between $600 million and $750 million through asset monetization over the next three years. The plan also includes reinvestments in high-potential locations and the launch of smaller format stores, while enhancing the omni-channel shopping experience.
The firm views Macy's updated strategy as a logical response to the varying performance across its store portfolio and believes that downsizing to a more manageable and profitable store base is a wise move in light of the structural changes in the retail sector.
Despite the strategic initiatives, Macy's continues to encounter challenges. The retailer operates in a highly competitive promotional environment and faces macroeconomic pressures that obscure its near-term outlook.
Traffic to the category remains a concern. Consequently, Telsey Advisory Group has decided to maintain its Market Perform rating and $17 price target. This target is based on a multiple of 6.1 times the firm's two-year forward earnings per share estimate of $2.79, aligning with recent trading multiples.
In other recent news, Macy's Inc. (NYSE:M) has seen a series of significant developments. The company announced a board director resignation, with William H. Lenehan stepping down, reducing the board size from 15 to 14. This change was not due to any disagreements on operations, policies, or practices. Macy's also declared a quarterly dividend of 17.37 cents per share, emphasizing its commitment to shareholder value.
Financially, the company reported mixed results, with a 1% comp sales gain at top-performing stores being offset by a 3.8% decline in net sales. Full-year net sales are projected to be between $22.1 billion and $22.4 billion. Analyst firms JPMorgan and TD Cowen maintained their Overweight and Hold ratings on Macy's respectively, citing potential for gross margin expansion and inventory management improvements.
The company recently completed the early tender phase of a cash tender offer, purchasing up to $220 million in aggregate principal amount of certain outstanding debt securities. In addition, Macy's launched a contemporary menswear brand, Mode of One, expanding its product portfolio. In preparation for the holiday season, the company plans to hire over 31,500 seasonal workers to meet anticipated customer demand.
InvestingPro Insights
Macy's recent strategic moves align with several key insights from InvestingPro. The company's market cap stands at $4.42 billion, reflecting its significant presence in the retail sector. Despite facing challenges, Macy's has maintained a dividend yield of 4.36%, with InvestingPro Tips highlighting that the company has raised its dividend for 3 consecutive years and maintained payments for 22 years. This commitment to shareholder returns could be seen as a positive signal amidst the ongoing restructuring efforts.
The retailer's P/E ratio of 23.69 suggests that investors are pricing in some growth expectations, possibly related to the Bold New Chapter strategy. However, InvestingPro Tips also indicate that 5 analysts have revised their earnings downwards for the upcoming period, which may reflect the uncertainties mentioned in the Telsey Advisory Group report.
Macy's revenue for the last twelve months was $23.51 billion, with a gross profit margin of 41.03%. These figures provide context to the company's scale and profitability as it navigates its strategic transformation. The InvestingPro Fair Value of $16.81 is interestingly close to Telsey's price target of $17, suggesting a potential upside from the current price levels.
For investors seeking a deeper understanding of Macy's financial health and future prospects, InvestingPro offers 9 additional tips that could provide valuable insights into the company's performance and outlook.
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