Crucial quarter

The fourth quarter is very crucial for retailers and department stores, as it includes the holiday season. Department stores expand their merchandise offerings and up their marketing efforts to capture sales opportunities in the holiday season.

In September 2015, Macy’s (M) announced that it expects to hire seasonal associates for ~85,000 positions for the 2015 Christmas and holiday season. In September, Kohl’s (KSS) stated that it anticipates hiring more than 69,000 seasonal employees. In October 2015, Nordstrom (JWN) revealed its plan to employ 11,800 seasonal employees.

Why 4Q15 Might Not Have a Positive Impact on Macy’s Stock Price

Expected impact of 4Q15 results

Macy’s stock price might not be positively impacted by its 4Q15 results, given the company’s gloomy outlook. Macy’s expects its 4Q15 same-store sales on an owned plus licensed basis to decline 2%–3%. The company expects its 4Q15 same-store sales on an owned basis to be 50 basis points lower than on an owned plus licensed basis. Macy’s makes up 0.3% of the iShares Global Consumer Discretionary ETF (RXI) and 0.1% of the iShares Russell 1000 ETF (IWB).

The consensus Wall Street sales estimate for Macy’s 4Q15 sales is $9.0 billion, which reflects a 3.6% decline on a year-over-year basis. Macy’s expects its 4Q15 diluted EPS (earnings per share) to be $2.54–$2.64, excluding any additional charges associated with store closings or cost reductions. Analysts currently expect the 4Q15 adjusted EPS to come in at $2.56, indicating an expected 4.9% rise from the comparable quarter of the previous year.

General expectations for the holiday season

According to the National Retail Federation (or NRF), sales for the 2015 holiday season (excluding autos, gas, and restaurant sales) are expected to rise by 3.7% to $630.5 billion on a YoY (year-over-year) basis. This estimated growth rate is lower compared to the 4.1% growth seen in the 2014 holiday season. For more information, you can read Key Spend Trend Analysis for the 2015 Holiday Season. According to NRF’s press release on December 11, sales in November (excluding autos, gas, and restaurants) grew 0.5% on a seasonally adjusted basis compared to October and by 3% on an unadjusted YoY basis.

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