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Macy's outlook disappoints Street, shares drop

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05/09/2012 | 04:05pm CET

Macy's Inc (>> Macy's, Inc.) kept its full-year profit forecast despite reporting better-than-expected first-quarter earnings on Wednesday, sending the retailer's shares down 6 percent.

Macy's Inc (>> Macy's, Inc.) kept its full-year profit forecast despite reporting better-than-expected first-quarter earnings on Wednesday, sending the retailer's shares down 6 percent.

Macy's, which also owns the upscale Bloomingdale's chain, has handily outperformed mid-tier competitors such as J.C. Penney Co Inc (>> J.C. Penney Company, Inc.) and Kohl's Corp (>> Kohl's Corporation) in terms of sales gains in the last year.

But Macy's gross profit margin edged down in the first quarter and its sales growth in April, which had been expected to be weaker than in March because of an early Easter, came in below what Wall Street was expecting.

Macy's may have been facing pressure from Kohl's, which lowered prices during the quarter, along with shoppers' concerns about higher gas prices, said Morningstar analyst Paul Swinand.

He added that Macy's long winning streak may have led analysts to get ahead of themselves.

Macy's shares last week rose to $42.17, their highest level since July 2007, making them vulnerable to a sell-off. On Wednesday morning, the shares fell 6 percent to $37.14 on the New York Stock Exchange.

The S&P Retail Index <.RLX> has fallen 4 percent in the last week as job market numbers have raised fears shoppers might pull back again.

NO CHANGE TO FORECAST

Macy's reported net income of $181 million, or 43 cents a share, for the quarter that ended April 28, up 38 percent over the profit of $131 million, or 30 cents a share, a year earlier.

That was 3 cents better than what Wall Street analysts were forecasting, according to Thomson Reuters I/B/E/S.

But Macy's left its full-year earnings forecast intact at $3.25 to $3.30 a share, below analysts' expectations for $3.41 a share.

Macy's expects same-store sales to rise about 3.5 percent for the rest of this year.

The chain, which operates about 800 namesake stores as well as about 45 Bloomingdale's stores, said its gross margin edged down 0.3 points to 38.8 percent of sales.

Macy's is the first major department store chain to report results. Rivals Kohl's and Nordstrom Inc (>> Nordstrom, Inc.) report on Thursday, while Penney will report next week.

Last week, in one of the rare times it has disappointed Wall Street of late, Macy's said same-store sales rose 1.2 percent in April, missing analysts' average forecast of 1.9 percent.

As previously reported, Macy's same-store sales, or sales at stores open at least a year, were up 4.4 percent in the first quarter. Online sales rose 33.7 percent, accounting for 1.5 percentage points of the same-store sales gain.

Still that was far better than Kohl's 0.2 percent increase for the quarter.

Macy's is already giving its regions more leeway in ordering items that are appropriate for their markets, something it credits for its sales gains .

Now it is simplifying its order process for items geared at young adults so that buyers can order more quickly and speed up the time it takes for those goods to get to stores, helping it compete with fast-fashion chains.

(Reporting By Phil Wahba in New York; Editing by Gerald E. McCormick, Dave Zimmerman)

By Phil Wahba

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Sales 2017 14 803 M
EBIT 2017 944 M
Net income 2017 406 M
Debt 2017 2 336 M
Yield 2017 2,54%
P/E ratio 2017 27,09
P/E ratio 2018 19,38
EV / Sales 2017 0,86x
EV / Sales 2018 0,82x
Capitalization 10 416 M
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Mean consensus HOLD
Number of Analysts 29
Average target price 54,8 $
Spread / Average Target -8,8%
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NameTitle
Erik B. Nordstrom Co-President & Director
Blake W. Nordstrom Co-President & Director
Peter E. Nordstrom Co-President & Director
Enrique Hernandez Non-Executive Chairman
Michael G. Koppel Chief Financial Officer & Executive Vice President
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