(M 32.30, +2.37, +7.92%)
is testing recent resistance near the $32 level premarket after the company
beat first quarter estimates and raised guidance for fiscal 2019.
First quarter net sales grew 3.6% to $5.54 bln and comparable (same store) sales grew 3.9% on an owned basis and 4.2% on an owned plus licensed basis. Expectations were for a 1% comp increase. The company estimates that comparable sales benefited ~250 basis points from the shift of the Friends and Family promotional event from the second quarter to the first. Adjusted for that, the company estimates that comparable sales were up 1.7% on an owned plus licensed basis.
Earnings nearly doubled to $0.48/share, or $0.42/share excluding asset sale gains. Gross margin grew 70 basis points to 39% and the operating margin increased 50 basis points to 1.6%, excluding impairment charges. Encouragingly, inventories fell 6%.
"Macy's, Inc.'s results for the first quarter of 2018 reflect continuing momentum in the business. We exceeded our expectations and saw strong performance across all three brands—Macy's, Bloomingdale's, and Bluemercury—as well as across all geographic regions and families of business. We are maintaining a healthy inventory position, which helped us deliver improved gross margin," said Jeff Gennette, Macy's, Inc. chairman and chief executive officer. "The winning formula for Macy's, Inc. is a healthy brick & mortar business, robust e-commerce, and a great mobile experience. While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business. Our best customer is responding well to the improvements we've made to her experience in our stores, on .com and through the Macy's app. Our first quarter performance reflects solid execution of our North Star Strategy, including merchandising and marketing activities. We also saw continued healthy consumer spending and significant improvements in international tourism."
Macy's continues to monetize its surplus of retail assets and close performing stores. In total, the company still has ~130,000 employees and 690 department stores. Macy's raised fiscal 2019 EPS guidance to $3.75-3.95 from $3.55-3.75 and raised same store sales guidance for the year to +1-2% from +0-1%.
Positive comp sales are a relief for Macy's investors after the company reported a low single digit comp sales decline three years in a row.
At $32/share, Macy's trades at just over 8x EPS, which is much cheaper than your average retailer at ~16x EPS. The discount seems to reflect the challenging outlook for department stores as ecommerce eats away at mall traffic. Still, other department stores Nordstrom (JWN), Kohl's (KSS), JCPenney (JCP), and Dillard's' (DDS) trade at an average of ~14x EPS estimates.
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