UBS Cuts Price Target on Macy's (M) to $33 Following 1Q Report

UBS maintained a Neutral rating on Macy's (NYSE: M), and cut the price target to $33.00 (from $41.00), following the company's 1Q earnings report. Macy's reported better-than-expected GM at +10bp, compared to the Street at -80bp. Management said 2Q is unlikely to improve. EPS guidance was cut by ~15% to $3.15-$3.40 from $3.80-$3.90.

Analyst Michael Binetti commented, "Macy’s cut 2016 SSS guidance to -3% to -4% vs. -1% prev., but lowered EPS guidance by ~15% to $3.15-$3.40 from $3.80-$3.90. 1Q GM was better-than-expected at +10bp YOY (UBSe: -125bp, Street -80bp)—boosted by a favorable YOY shift in timing of markdown allowances from vendors. 1Q SG&A deleverage was worse-than-expected (160bp vs. UBSe 40bp)—which suggests to us cost cuts could be getting tougher to find. Importantly, like LB & GPS, M said 2Q is unlikely to improve (2-yr SSS trends expected to continue—we estimate 2Q SSS -4.5% YOY incl. licenses). Adj debt/EBITDAR reached 3.1x (vs. target: 2.5x-2.8x)—increasing our concern that share repos could slow further (1Q was the slowest sequential share ct reduction since ’11)."

For an analyst ratings summary and ratings history on Macy's click here. For more ratings news on Macy's click here.

Shares of Macy's closed at $31.38 yesterday.

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