UBS Remains Sidelined on Macy's (M) Following 2Q Beat and Announced Store Closures

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)."

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 $39.81 yesterday.

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