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Where Macy’s Valuation Stands

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Updated

Forward PE multiples

As of February 20, Macy’s (M) 12-month forward PE multiple was 7.6x, 12.3% lower than when it announced its lowered outlook for fiscal 2018[1.ended February 2] on January 10. Macy’s valuation multiple is lower than Nordstrom’s (JWN) and Kohl’s (KSS) 12.3x and 11.3x, respectively. Macy’s and its department store peers all have a lower valuation than the S&P 500, whose forward PE multiple is 16.6x.

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Analysts’ expectations

Analysts expect Macy’s adjusted EPS to rise 5.6% to $3.98 on sales growth of 0.5% in fiscal 2018. In fiscal 2019, they expect Macy’s sales to be flat and its adjusted EPS to fall 17.1%. Macy’s has been taking several steps to improve its performance, including closing unprofitable stores. The company has also been evaluating options to optimize the value of its real estate.

Under its North Star Strategy, Macy’s aims to improve its sales and drive efficiencies to bring down costs. A highly competitive and promotional retail environment is impacting department stores’ margins.

Macy’s also aims to improve customers’ in-store shopping experience to boost traffic. The company launched virtual reality furniture at 69 stores in fiscal 2018’s third quarter, a facility that allows customers to design their living spaces on an iPad with the help of Macy’s staff and check various furniture options. Macy’s is fighting a tough battle against online retailers, which are rapidly deteriorating traditional retailers’ market share.

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