On Monday, Citi revised its stock price target for Macy's (NYSE:M), lowering it to $17.00 from the previous $22.00, while keeping a Neutral rating on the stock. The adjustment comes as the firm anticipates the company's second-quarter sales to align with consensus estimates and its own guidance, but expects earnings per share (EPS) to surpass consensus.
The firm's analysis suggests a slight decline in Macy's sales by 1.2%, compared to the consensus of a 1.4% decrease and the company's own forecast of a 1-3% drop. However, Citi predicts that Macy's will report an EPS of $0.35, which is higher than the consensus of $0.30 and the guidance range of $0.25 to $0.33.
This projection is supported by Placer foot traffic data, which indicates approximately a 300 basis point acceleration in traffic compared to the first quarter. This foot traffic increase is seen as a positive sign for the expected 150 basis point acceleration in sales.
Despite these anticipated positive results, Citi believes the department store sector continues to face challenges. The firm also expects Macy's management to reiterate their annual earnings guidance of $2.55 to $2.90, consistent with the consensus estimate of $2.79. Citi anticipates that Macy's will likely maintain a cautious outlook, even if the quarter's results exceed expectations, due to the uncertain macroeconomic environment.
Moreover, Citi does not foresee Macy's management adjusting their guidance to account for any potential impact from the Consumer Financial Protection Bureau's (CFPB) proposal to cap late fees. The timing and implementation of this proposal remain uncertain, as the matter is currently under legal review.
In other recent news, Macy's has seen several noteworthy developments. The company reported robust Q1 results, with net sales of $4.8 billion and an adjusted EPS of $0.27, surpassing its forecast. Consequently, Macy's raised its EPS guidance for fiscal year 2024 to a range of $2.55 to $2.90, an increase of 3% at the midpoint. However, the gross margin forecast for the fiscal year was adjusted downward, reflecting a more conservative expectation for profit margins.
Analyst firms TD Cowen and Evercore ISI revised Macy's price targets to $19 and $17 respectively, maintaining their Hold and In Line ratings on the stock. These adjustments came in response to Macy's decision to reject an acquisition offer from Arkhouse Management and Brigade Capital Management. The investment firms have since increased their takeover bid to approximately $6.9 billion, signaling their continued interest in acquiring the retailer.
Macy's has also appointed Keith Credendino as the new Chief Information Officer (CIO), following Laura Miller's retirement. Credendino's previous contributions to the company include improving in-store and online customer experiences, launching digital marketplaces, and leading the modernization of checkout processes. These recent developments reflect the ongoing strategic efforts and financial performance of Macy's in the face of a challenging retail environment.
InvestingPro Insights
As Citi adjusts its price target for Macy's, the latest data from InvestingPro offers a detailed financial perspective on the company's current market position. Macy's is trading at a high earnings multiple with a P/E ratio of 351.59, indicating that investors may be expecting high future earnings growth from the company. However, when considering the adjusted P/E ratio for the last twelve months as of Q1 2025, which stands at a more modest 4.78, this suggests a different market sentiment regarding the company's sustainable earnings potential.
InvestingPro Tips highlight that Macy's is expected to grow its net income this year, which aligns with Citi's prediction of an EPS surpassing consensus estimates. The company's strong free cash flow yield is implied by its valuation, which could be a point of interest for investors focusing on cash generation efficiency. With a dividend yield of 4.46% and a consistent track record of maintaining dividend payments for 22 consecutive years, Macy's demonstrates a commitment to returning value to shareholders even amidst market challenges.
For readers looking to delve deeper into Macy's financials and future forecasts, there are additional InvestingPro Tips available, providing a comprehensive analysis of the company's performance and market outlook. These insights can be accessed through the InvestingPro platform.
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