Stifel Maintains 'Buy' Rating on Macy's (M) Following Q1 Report; 2015 Remains Transitional Year

Stifel affirms Macy's, Inc. (NYSE: M) with a Buy rating and $75 price target following the retailers Q1 report earlier Wednesday morning.

Macy's Q1 EPS of $0.56 compared with Stifel's EPS expectation of $0.63.

On Macy's comps (company-owned fell 0.7 percent), Stifel analyst Richard Jaffe commented, Comps decreased 0.7 percent versus a 1.6 percent decrease LY due to higher AUR offset by lower UPT and number of transactions. Licensed fee income is excluded from the comp and when included comps would have been -0.1 percent. By region, sales were strongest in the South. Tourist stores for both Macy’s and Bloomingdales were hurt during the quarter driven by weak International tourist spending due to the stronger dollar (negatively impacting comps by approximately 1 percent) and the West Coast port slowdown which resulted in late deliveries of Spring merchandise, holding back sales. By line of business, strength was seen in active, dresses, furniture and mattresses. Weak performing categories included fashion jewelry and watches, tabletop and housewares. We have modeled a modestly positive comp for 2Q as the company will likely use promotional activity to drive sales in efforts to clear excess inventory levels. However, comps will likely continue to be held back by weak International tourist spending.

Jaffe summarized, Our outlook is favorable, given the company's market dominance, extensive assortment of both exclusive and national brands distributed regionally (My Macy’s), and the success of the omnichannel shopping initiative. 2015 is a transition year as Macy’s enters phase three of its growth plan. Management is focused on making investments to drive top-line sales while maintaining the same level of profitability and ROIC. We anticipate that excess cash will continue to be used to repurchase shares and grow the company’s dividend. We believe that in the next 12 months, the shares will trade at a modest discount to the market multiple of 16x due to more modest growth.

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

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