Macy's Suspends Dividend & Withdraws Outlook Amid Coronavirus

Macy's, Inc. (NYSE:M) recently declared updates including suspension of its quarterly dividend, assessment of non-essential operating costs and withdrawal of fiscal 2020 outlook in view of uncertainty surrounding the coronavirus pandemic. Earlier, the company had also announced temporary store closures from Mar 17 through Mar 31. However, its e-commerce sites will continue to operate in the interim.

Per the latest release, management has decided to suspend its second-quarter fiscal 2020 dividend, without affecting the earlier announced payment. Shareholders of record as on Mar 13, 2020 will continue to receive first-quarter dividend of 37.75 cents a share on Apr 1. In a bid to curb expenses, Macy's has also been reviewing all its non-essential operating costs, and has lowered capital expenditures for the current fiscal year.

Consequently, management withdrew its previously announced fiscal 2020 guidance and refrained from providing any update on the same. For fiscal 2020, Macy’s had projected net sales of $23.6-$23.9 billion. It expected comparable sales on an owned plus licensed basis to decline 1.5-2.5%. Moreover, the company envisioned fiscal 2020 adjusted earnings per share (excluding asset sale gains) of $2.20-$2.40. Management had expected gross margin and SG&A expense rate to be roughly flat year over year. This Zacks Rank #3 (Hold) company informed that less than 50% of its private brand goods come from China.

Furthermore, the company has chosen to access the $1.5 billion available under its revolving credit facility. This agreement is slated to expire on May 9, 2024. All these measures are expected to provide additional financial flexibility to the company amid tough times in view of coronavirus pandemic.

We note that the novel coronavirus has been rattling most companies and derailing economic activities across the globe. In response to the pandemic, retailers are either shutting down stores or trimming work hours. Incidentally, several retailers have chosen to withdraw their guidance, unable to ascertain the possible impact on costs and revenues. Likewise, retailers such as Abercrombie & Fitch (NYSE:ANF) , Nordstrom (NYSE:JWN) and American Eagle Outfitters (NYSE:AEO) withdrew their initial guidance and closed stores.

Price Performance

In the past three months, shares of Macy’s have plunged 62.6% compared with the industry’s 63.4% decline.

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