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Macy’s Stock on the Rise after Strong Fiscal 4Q17 Earnings

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Market reaction

Macy’s (M) impressed investors with its sales and earnings growth for fiscal 4Q17.[fiscal 4Q17 ended February 3, 2018] Macy’s sales grew in fiscal 4Q17 after falling for 11 consecutive quarters.

The retailer’s stock rose 3.5% to $28.40 on February 27 in reaction to its strong fiscal 4Q17 results. The stock rose another 3.6% on February 28. On a YTD (year-to-date) basis, Macy’s stock has risen 16.8%.

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Peer comparisons

The stock prices of department store peers Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) have risen 8.3%, 21.9%, and 37.0%, respectively, on a YTD basis as of February 28. In comparison, the S&P 500 Index (SPX-INDEX) has risen 1.5% since the start of this year.

Strong consumer spending in the fourth quarter (which includes the holiday season), merchandising initiatives, and other growth strategies helped drive improved results in fiscal 4Q17. Macy’s and other department stores have been feeling the pressure from the growing strength of online retailers, particularly Amazon (AMZN).

To fight the competition from online retailers, Macy’s and other department stores have been investing in their online channels and technology. However, such growth investments are pressuring their margins.

In collaboration with Brookfield Asset Management, Macy’s has been looking for options to optimize its real estate portfolio. The company’s asset sales generated $411.0 million in cash proceeds in fiscal 2017.

Series overview

In this series on Macy’s fiscal 4Q17 results, we’ll discuss the company’s sales, margins, and earnings in the quarter. We’ll also look at the revisions analysts made to the company’s stock price target in reaction to its fiscal 4Q17 results. Lastly, we’ll discuss the company’s valuations.

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