Macy’s Inc (NYSE: M) stock rose more than 4 percent on Tuesday after the retailer reported quarterly earnings suggesting Macy’s streamlining and reorganizing efforts are paying off.
Macy’s reported fourth-quarter adjusted earnings per share of $2.82, topping consensus analyst forecasts of $2.71.
Revenue of $8.67 billion came up just short of consensus estimates of $8.68 billion. However, same-store sales growth of 1.3 percent far surpassed analysts’ prediction of only 0.1 percent growth, suggesting Macy’s efforts to shrink its footprint are making the company more efficient.
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“We were disciplined with our promotional cadence and maintained a good inventory position,” CEO Jeff Gennette says in a statement. “We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”
Macy’s reported net income of $1.33 billion for the quarter, up from only $475 million a year ago.
In an effort to combat online competition from Amazon.com ( AMZN) and others, Macy’s has been cutting costs and closing stores to boost profitability. Since 2015, Macy’s has closed more than 120 stores. The company said it has now completed 83 of the approximately 100 store closures it announced in August 2016. Store closures and other measures will help Macy’s save as much as $300 million in costs annually starting in 2018.
Macy’s also continued its strategy of monetizing its valuable property via asset sales. In the fourth quarter, Macy’s generated $411 million in cash proceeds from asset sales, bringing its three-year total to $1.3 billion. The company said it plans to continue to identify locations where the value of Macy’s property exceeds the potential value of retail operations.
Looking ahead to fiscal 2018, Macy’s guided for comparable-store sales growth between 0 and 1 percent. Macy’s anticipates EPS between $3.55 and $3.75 and a revenue decline of 0.5 to 2 percent.
CFRA analyst Efraim Levy says Macy’s is not out of the woods yet, but the company seems to be making all the right moves.
“While we expect troubles for department stores in general to persist, we give M credit for proactive restructuring (planned closing of 100 stores, reorganizing floor space and monetizing some real estate assets),” Levy says.
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CFRA has a “buy” rating and $28 price target for Macy’s stock.
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Macy’s Inc (M) Stock Hits a Holiday Home Run originally appeared on usnews.com
