How Does Macy’s Valuation Compare?
Forward price-to-earnings multiple
As of March 23, Macy’s (M) was trading at a 12-month forward PE (price-to-earnings) multiple of 8.1x. The company is currently trading at a lower valuation multiple than the S&P 500 (SPX), which has a forward PE multiple of 18.6x, and the S&P 500 Consumer Discretionary, which has a forward PE multiple of 37.0x.
Macy’s valuation multiple has fallen 14.2% since the company announced its fiscal 4Q16 results on February 21, 2017. Macy’s exceeded analysts’ earnings estimate but missed the fiscal 4Q16 sales estimate.
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Macy’s valuation multiple is lower than its department store peers’. As of March 23, Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) were trading at 12-month forward PE multiples of 14.2x, 10.4x, and 11.6x, respectively. The 12-month forward PE multiple differs among these department store peers based on several factors, including growth expectations, risk-return parameters, and leverage.
What analysts expect
Currently, analysts expect Macy’s sales to fall 3.8% to $24.8 billion. The company’s adjusted EPS (earnings per share) are expected to rise 11.3% to $3.46. Adjusted EPS exclude the impact of one-time items. Macy’s sales are expected to reflect continued weakness due to rising competition from Amazon (AMZN) and off-price retailers such as The TJX Companies (TJX).
Macy’s is streamlining its business by closing underperforming stores. The company has closed 66 stores and intends to shut down 34 more over the next few years.
The company’s store growth plan for fiscal 2017 includes a Macy’s store in Westfield Century City in Los Angeles, and Fashion Place in Murray, Utah. The company also plans to open about 30 additional Bluemercury locations and 30 Macy’s Backstage locations inside Macy’s stores. In 2017, Macy’s plans to open a new Bloomingdale’s store in 360 Mall in Al Zahra, Kuwait, under license agreements with Al Tayer Group. For more updates on the sector, visit our Department Stores page.