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Key Takeaways from Macy’s Q4 and Fiscal 2018 Results


Feb. 28 2019, Published 12:25 p.m. ET

Results summary

Macy’s (M) stock rose 1.5% on February 26, the day the company announced its results for fiscal 2018 and the fourth quarter (ended February 2). The company’s stock rose 2.4% yesterday. Macy’s exceeded analysts’ fourth-quarter sales and earnings expectations. Its SSSG (same-store sales growth) was 0.7% on an owned-plus-licensed basis, marking a fifth consecutive quarter of SSSG. Macy’s owned-plus-licensed SSSG was 2.0% in fiscal 2018.

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Analysts’ reactions

Some analysts lowered their price target for Macy’s following its results over concerns about department stores’ growth prospects as online retailers continue to grab market share. Yesterday, UBS lowered its price target for Macy’s stock to $25 from $26, Morgan Stanley lowered it to $22 from $24, and Jefferies lowered it to $27 from $35.

As of yesterday, Macy’s stock was down 15% year-to-date. In comparison, Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) had risen 1.4%, 2.3%, and 19.2%, respectively, and the S&P 500 was up 11.4%. Analysts’ average 12-month price target of $25.86 for Macy’s stock implies a 2.0% upside.

Macy’s intends to improve its top line through further expansion of its off-price Backstage stores. Macy’s plans to open at least 45 Backstage locations within Macy’s stores in fiscal 2019 after opening over 120 in fiscal 2018. Macy’s planned investments in 50 selected stores under its Growth50 strategy have delivered favorable results, and now the company wants to expand this strategy to 100 additional stores.

Macy’s will also enhance its mobile app to capture the rapid growth in this channel. The company delivered over $1 billion in sales through its mobile app in fiscal 2018. Macy’s also plans to further strengthen its position in six merchandise categories—dresses, fine jewelry, big ticket, men’s tailored clothing, women’s shoes, and beauty.

To improve its productivity, Macy’s intends to streamline its top management. We’ll discuss the company’s margins and productivity efforts later in this series. First, we’ll look at Macy’s sales performance.


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