UBS Remains Sidelined on Macy's (M) Following 2Q Beat and Announced Store Closures
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UBS reiterated a Neutral rating on Macy's (NYSE: M), and raised the price target to $40.00 (from $33.00), following the company's 2Q earnings report and announced closures. Macy's reported EPS of $0.54 ahead of the Street's $0.45 estimate. Macy's will close 100 doors near year-end. A ~$1B sales reduction (-4%). Macy's believes it can offset foregone EBITDA with cost saves.
Analyst Michael Binetti commented, "M reported 2Q EPS of $0.54 (UBSe: $0.61, Street: $0.45)—beating our est ex-real estate gains ($0.50 vs UBSe: $0.48). SSS (ex-licenses) improved sequentially to -2.6% (UBSe: -5%, Street: -4.7%) from -6.1% in 1Q. 2Q GMs were solid at flat YOY (UBSe: -65bp, Street: -60bp). Inventory control was solid at -3% YOY vs revs -4%. EBIT margin (ex-gains) compressed -115bp YOY (UBSe: -135bp). SSS accelerated through 2Q, and August trends are solid. We're increasing our 3Q & 4Q SSS slightly (3Q to –1.5% from –2.5% prev, 4Q to –1% from –2% prev). That said, transactions remained deeply negative in 2Q, down -5% including ecom—leaving us cautious on raising our 4Q SSS forecast to positive (which would create a more favorable stock backdrop, in our view)."
Shares of Macy's closed at $39.81 yesterday.
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