Sell Macy's (M) Stock With Q1 2019 Earnings Expected To Tumble?

Shares of Macy's (NYSE:M) have tumbled nearly 30% in 2019, while the broader market and retail industry rebounded. Times have been tough for the historic department store giant in recent years as the overall retail world dives deeper into e-commerce. Now investors need to decide what to do with Macy’s stock heading into the release of its first-quarter fiscal 2019 financial results on Wednesday.

Quick Overview

Macy’s was once part of a gold standard of retail. Today, the company’s name recognition might still be high, but consumers have seemed to move on in an Amazon (NASDAQ:AMZN) -focused retail age where speed and ease have become paramount. Macy’s has, of course, expanded its digital offerings in order to better compete going forward. These initiatives include expanded “Buy Online Pickup in Store” and “Buy Online Ship to Store” offerings, along with a beefed up vendor direct program, which helped it nearly double its online SKUs in 2018.

Looking ahead to 2019 and beyond, Macy’s executives have said they hope to improve supply chain efficiencies, bolster its mobile app as the company tries to focus on a “mobile first” strategy, and roll out more in-store upgrades around the country. Macy’s, which also owns Bloomingdale's and Bluemercury, is not alone its plans to improve its digital business. Kohl's (NYSE:KSS) , JC Penney (NYSE:JCP) , and Nordstrom (NYSE:JWN) have all tried to introduce more modern retail offerings to help attract a wider consumer base. But these strategies cost a lot of money, and giants such as Nike (NYSE:NKE) and others have committed to a more direct-to-consumer-heavy future.

Last quarter, Macy’s adjusted earnings fell 4.2% on the back of a 2.5% drop in sales, during the key holiday shopping period. M stock has fallen by over 13% since then, to help shares of the Cincinnati, Ohio-based company come down nearly 30% over the past 12 months. Investors will also notice just how hard the last five years have been for Macy’s.

Q1 2019 Outlook & Earnings Trends

Macy’s first-quarter fiscal 2019 revenue is projected to slip 0.21% from the prior-year quarter to hit $5.53 billion. Looking further ahead, the company’s full-year revenue is expected to come in roughly flat, with 2020’s sales projected to dip slightly below our 2019 estimate.

At the bottom end of the income statement, Macy’s adjusted quarterly earnings are projected to plummet 25% to $0.36 share. Meanwhile, the department store’s full-year fiscal 2019 EPS figure is expected to fall nearly 26%. Peeking even further ahead, M’s adjusted fiscal 2020 earning are projected to fall 5% below our current-year estimate.

Along with its overall negative earnings estimates, Macy’s has seen its estimate revision activity trend more heavily in the wrong direction recently. With that said, the company’s management has helped Macy’s successfully top quarterly estimates in the trailing four periods, to extend a strong history of quarterly earnings beats.

Bottom Line

Macy’s is currently a Zacks Rank #4 (Sell) based, in large part, on its recent earnings estimate revision activity. M stock hovered down around 3.83% at $21.60 per share through mid-afternoon trading Monday as the market dipped on U.S./China trade war-related fears. This represented a roughly 48% downturn compared its 52-week intraday high of $41.99 per share, which could help Macy’s stock following earnings if the firm gives Wall Street any positive signs.

Macy’s is also a dividend payer, with an impressive 6.72% yield. But the price movement chart above helps show investors that M stock has been on a roller coaster ride. Plus, the retail industry is full of companies that seem more ready to compete in the modern retail age, including Lululemon (NASDAQ:LULU) and others.

With all that said, Macy’s is scheduled to report its Q1 2019 earnings results before the market opens on Wednesday, May 15. Make sure to head back to Zacks for a complete breakdown of the firm’s actual quarterly metrics. Fellow retail bellwether Walmart (NYSE:WMT) also reports its quarterly results this week (also read: Buy Walmart Stock Ahead of Q1 Fiscal 2020 Earnings Thursday?)

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