For the second straight quarter, Macy’s Inc (NYSE: M) has wowed the market with better-than-expected earnings numbers and an optimistic outlook. Macy’s stock traded 6 percent higher Wednesday morning after the company reported that its holiday sales momentum carried over into the first quarter of 2018.
Macy’s reported first-quarter adjusted earnings per share of 48 cents and revenue of $5.5 billion. Both numbers came in ahead of consensus analyst estimates of 37 cents and $5.4 billion, respectively. Revenue rose 3.6 percent compared to a year ago.
Perhaps the most bullish number in the report was Macy’s same-store sales growth of 4.2 percent. Not only was that growth well above the 1.4 percent analysts had expected, it also was a sharp increase to the 1.3 percent growth the company reported in the fourth quarter.
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Macy’s same-store sales declined 4.3 percent overall in 2017, a trend that many analysts found troubling. The past two quarters seem to indicate that same-store sales are finally trending in the right direction once again. The performance is a sign Macy’s efforts to shrink its footprint by closing stores and reducing its head count is helping its business become more efficient.
CEO Jeff Gennette says Macy’s is also doing a better job of managing its inventory.
“We exceeded our expectations and saw strong performance across all three brands — Macy’s, Bloomingdale’s and Bluemercury — as well as across all geographic regions and families of business,” Gennette says in a statement. “We are maintaining a healthy inventory position, which helped us deliver improved gross margin.”
Macy’s raised its full-year adjusted EPS guidance from a previous range between $3.55 and $3.75 to a new range between $3.75 and $3.95. The company also raised its full-year same-store sales growth guidance from a range of 0 to 1 percent to a new range of 1 to 2 percent.
Full-year guidance suggests Macy’s doesn’t expect its impressive first-quarter momentum to continue throughout the rest of the year. CFRA analyst Efraim Levy says challenges will persist, but Macy’s is making the right moves.
“We see pressure on profit growth after challenges from difficult consumer trends, notably in apparel,” Levy says. “However, we see benefits from cost reduction initiatives.”
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CFRA has a “buy” rating and $36 price target for Macy’s stock.
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Macy’s Momentum Carries Over to 2018 originally appeared on usnews.com
