Macy's reported better-than-expected first-quarter results Thursday. Amid lowered expectations from other major U.S. retailers, the department store operator raised its outlook. Macy's stock surged on the news.
Macy's Earnings
Estimates: Analysts expected earnings of 82 cents per share, on $5.33 billion in revenue. Wall Street expected same-store sales to increase by 13.3%.
Results: Macy's earnings per share ballooned 177% vs. a year earlier to $1.08. Net sales increased 14% to $5.35 billion. Same-store sales increased by 12.4%.
Outlook: Macy's expects net sales of $24.4 billion to $24.7 billion for the 2022 fiscal year. The owner of Macy's and high-end Bloomingdale's stores projects full-year adjusted earnings of $4.53 to $4.95 per share. This is up from the previous forecast of $4.13 to $4.52 a share.
Stock: Shares shot up 19% to 22.92 in Thursday's stock market trading, following Wednesday's 9% bounce. Macy's stock is still down so far in May and well off its $37.95 high in November.
Macy's stock has a 49 Composite Rating. It has a EPS Rating of 77
Following Macy's earnings report, CFRA Research analyst Zachary Warring increased his 12-month price target to 36 from 30.
"We are seeing sustainable operating efficiencies in the underlying business and even though we have some hesitations around the size of stores and locations in malls, we believe M is trading in deep value territory with strong capital returns and cash flows," Warring wrote in his research note.
Other Retailers Hit Hard
The company's strong performance comes after mega retailers Walmart and Target both missed earnings estimates and cut full-year EPS targets last week. Ross Stores and Abercrombie & Fitch also reported grim guidance in the past week.
Athletics retailer Dick's Sporting Goods followed suit on Wednesday, slashing its full-year earnings guidance amid weaker economic conditions. Retailers across the country have been dealing with increased inventory as rising costs is making consumers think twice about purchasing items.
Nordstrom is another business that could give hope to investors surveying the retail marketplace. On Tuesday, the luxury department store chain also beat out Wall Street's estimates and raised its profit forecasts. JWN expects earnings per share of $3.38-$3.68. An increase from its previous range of $3.15-$3.50.
Macy's and Nordstrom posting stronger than expected quarterly earnings could be an indication that higher-income consumers are not being deterred by rising costs.
Strong results from dollar stores Dollar Tree and Dollar General on Thursday suggest resilience at the lower end of the consumer scale as well.
Macy's Stock: An Inventory Increase
Macy's reported an inventory as of April 30 up 17% year-over-year and down 10% versus 2019.
The company's explanation is a "downshift in consumer demand from active/casual and soft home categories to accelerated demand at occasion-based apparel." Macy's also experienced a "loosening in supply chain constraints" which created an unexpected percentage of receipts.
Still, that was a much-smaller year-0very-year inventory gain than many other retailers have reported in the past week or so.
CEO Jeff Gennette told analysts during the earnings call that "macroeconomic pressures on consumer spending" did not stop Macy's customers from shopping.
Gennette said people from all income brackets engaged with Macy's but that revenue was led by higher and middle income customers and that luxury sales were a "standout."
"Shopping behavior among high-income consumers has so far remained less affected by inflation," he said on the call.
"We operate across the value spectrum, from off-price to luxury. This, coupled with our wide assortment of categories, products and brands gives us the ability to flex with consumer demand," Gennette added.
However, it is unlikely Macy's will be completely immune from the inflationary pressure that Walmart, Target and others have been dealing with.
"Macy's will need to strategically raise its prices and work with its suppliers to find a way to pass on the additional costs it is shouldering," Third Bridge senior analyst Landon Luxembourg wrote.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
