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Macy’s Dresses to Impress with Q1 2018 Results, Upgraded Guidance

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Macy’s Dresses to Impress with Q1 2018 Results, Upgraded Guidance PART 1 OF 4

Macy’s Dresses to Impress with Q1 2018 Results, Upgraded Guidance

Stock high on Q1 2018 results

Macy’s (M) stock surged 10.8% on May 16 in reaction to the company’s strong results for the fiscal first quarter, which ended on May 5. The company beat analysts’ sales and earnings expectations. Investors were impressed as the company raised its sales and earnings guidance for fiscal 2018.

News of Macy’s strong fiscal first-quarter results also boosted the stocks of its department store peers. On May 16, the stock prices of Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) were up 2.4%, 1.9%, and 5.5%, respectively. On May 16, Macy’s stock has risen 31.7% year-to-date compared to the S&P 500 Index, which is up 1.8% YTD.

Macy’s Dresses to Impress with Q1 2018 Results, Upgraded Guidance

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Earnings ahead of expectations

Macy’s (M) delivered adjusted earnings per share of $0.48 in the fiscal first quarter compared to $0.26 in the fiscal first quarter of 2017. The company significantly surpassed the consensus analyst estimate of $0.37. Higher sales and lower taxes helped Macy’s deliver strong bottom-line growth.

Excluding the impact of gains from asset sales, the company’s adjusted EPS came in at $0.42 in the fiscal first quarter compared to $0.12 in the fiscal first quarter of 2017.

Department stores have been struggling over the last few years due to the growing strength of Amazon (AMZN) and other online retailers. Macy’s and its peers have been investing aggressively in their online infrastructures to enhance their customers’ shopping experiences. We’ll discuss some of Macy’s growth strategies in Part 4 of this series.

Update on China joint venture

In its fiscal first quarter results press release, Macy’s announced its decision to end its joint venture with Fung Retailing Limited. Macy’s expects to be on Alibaba’s e-commerce platform, TMall, and social media channels. 

The company’s ongoing China business is expected to be managed by its e-commerce team in San Francisco with operational support from Fung Omni in Shanghai. In this regard, the company recorded $19.0 million in impairments and other costs in the fiscal first quarter and expected to book an additional $10.0 million over the next few quarters.

We’ll take a closer look at Macy’s sales in the next part of this series.

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