Macy's (M) Beats On Q1 Earnings, Strategic Efforts On Track

Macy’s, Inc. (NYSE:M) delivered eighth straight quarter of positive earnings surprise, when it reported first-quarter fiscal 2019 results. The company continued to register positive comparable sales and witnessed double-digit growth in the digital business. Management hinted that its Growth50 stores initiative and Backstage is aiding its brick-and-mortar performance and the company is progressing well with its North Star Strategy. Also, management reaffirmed fiscal 2019 view.

We note that shares of this Cincinnati, OH-based company are up roughly 2% during the pre-market trading hours. The company had earlier informed that it has undertaken restructuring actions that is likely to result in annual cost savings of $100 million. We note that this Zacks Rank #4 (Sell) stock has slid 12.4% in the past three months compared with the industry's decline of 6.1%.

Let’s Delve Deep

Macy’s posted adjusted earnings of 44 cents a share that comfortably surpassed the Zacks Consensus Estimate of 31 cents but declined 8.3% from the year-ago period. Fall in earnings may be attributed to higher cost of sales and increased SG&A expenses. The company generated net sales of $5,504 million that fell short of the Zacks Consensus Estimate of $5,529.3 million and decreased marginally by 0.7% year over year.

Comparable sales (comps) on an owned plus licensed basis rose 0.7%, while on an owned basis, the metric improved 0.6%. This marked the sixth straight quarter of comps growth for the company. Strategic investments across stores, technology and merchandising are aiding comparable sales growth.

Adjusted EBITDA declined 11.5% to $447 million, while adjusted EBITDA margin contracted 100 basis points to 8.1%.

Other Financial Aspects

Macy’s ended the quarter with cash and cash equivalents of $737 million, long-term debt of $4,680 million, and shareholders’ equity of $6,323 million.

FY19 View

Macy’s continues to anticipate fiscal 2019 net sales to be roughly flat with both comps on an owned plus licensed basis and comps on an owned projected to be flat to up 1%. Management retained adjusted earnings view of $3.05-$3.25 per share for fiscal 2019, down from $4.18 reported in fiscal 2018. The Zacks Consensus Estimate for the fiscal year is pegged at $3.10.

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