Stifel Sees Near-Term Weakness in Macy's (M), But Longer-Term Plan Still Intact
Stifel is out with initial commentary on Macy's (NYSE: M) following Q2 results and strategic initiative announcements. The firm has Macy's at Buy with a price target of $75.
Analyst Richard Jaffe noted that Macy's Q2 EPS of $0.64 miss the firm's $0.77 estimate. The analyst commented, We anticipate near term weakness at Macy’s, but longer term we believe the company’s strategic initiatives will play out favorably, including the sale of some of its real estate. We believe Macy’s continued focus on improving the customer shopping experience through both ease of shopping and through a better product assortment, will continue to help the company gain share and drive sales profitably.
Other points include:
- Derivative Call – Virtually all of our retailers will likely have repercussions from the port strike as well as decreased demand for apparel. Our biggest concerns this week include Kohl's (NYSE: KSS) and Nordstrom (NYSE: JWN.
- Gross Margin down 60 bps and Expenses up 1.7% – Gross margin decreased 60 bps due to increased markdowns. Expenses increased 1.7% and deleveraged 140 bps on the -2.1% comp, likely related to the company’s sales growth initiatives (Macy’s Backstage, Blue Mercury stores, and accelerating progress in the online business).
- Inventory Levels up 3% – Ending inventory per square foot increased by 3% by our estimation. This could result in some margin pressure in 3Q.
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