Must-Know: Factors that Might Impact Macy’s 1Q15 Earnings



Expectations for 2015

Macy’s (M) and rival Nordstrom (JWN) will report their 1Q15 earnings on May 13 and 14, respectively. In its guidance issued in February 2015, Macy’s stated that it expects its fiscal 2015 earnings to be in the range of $4.70 to $4.80 per share. Analysts expect the company’s fiscal 2015 adjusted earnings per share (or EPS) to come in at around $4.75.

Macy’s and Nordstrom together constitute ~0.18% of the portfolio holdings of the SPDR S&P 500 ETF (SPY).

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Recent performance

Macy’s adjusted EPS, which excludes one-time items, increased by 5.6% to $2.44 in 4Q14 on a year-over-year basis. For fiscal 2014, the company’s adjusted EPS grew by 10.0% to $4.40 from the previous year. The company has been registering double-digit growth in its adjusted earnings over the past five fiscal years. However, the growth rate has come down from 15.6% in fiscal 2013, 20.1% in fiscal 2012, and 36.5% in fiscal 2011.

Macy’s net income increased by 2.7% to $1.5 billion in fiscal 2014, despite the impact of impairment and store closing charges as well as costs related to the early retirement of debt.

Rival department store Kohl’s (KSS) adjusted EPS increased by 4.7% to $4.24 in the fiscal year ending January 31, 2015. However, JCPenney (JCP) reported an adjusted loss of $2.67 per share compared to a loss of $5.74 in the prior year. Sears (SHLD) continued to disappoint investors by reporting a wider adjusted loss of $7.81 per share compared to a loss of $6.14 in the previous fiscal year.

Factors that might influence 1Q15 earnings

For 1Q15, analysts expect adjusted EPS to come in at $0.62, a 3.3% growth rate compared to the first quarter of fiscal 2014. Macy’s 1Q15 earnings might be impacted by restructuring plans, investment in digital retailing channels, costs related to store closings and openings, as well as costs related to workforce. Also with the surge in online sales, shipping costs might adversely impact department stores like Macy’s. To mitigate the impact of higher shipping costs as well as to increase store traffic, Macy’s introduced its “Buy Online Pickup in Store” capability in 2014.

The next part of this series discusses the company’s efforts to make a mark in off-price retailing.


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