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Macy's (M) Replies |
HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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 Posted: Wed Aug 10, 2011 12:03 pm Post subject: |
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Morningstar on M's fiscal 2Q earnings:
| Quote: | | Macy's M continues to produce results ahead of our and the market's expectations, and we plan a modest increase in our fair value estimate based on the stronger-than-expected full-year and future-year earnings potential and a small increase for the time value of money. While the market sell-off has left Macy's looking cheap on a multiple basis and its valuation has been attractive relative to higher-end department stores, our long-term model is still constrained by minimal growth prospects. Macy's can continue to increase same-store sales for the next one to two years, but eventually will run out of incremental operating improvements that are currently driving the same-store sales numbers, in our view. In the second quarter, sales rose 7.3% to almost $6 billion, just ahead of same-store sales, which were up 6.4%. This is particularly impressive as Macy's was lapping a tough July, in which it posted a 7.3% comp last year. Sales results were fully disseminated, as Macy's reports monthly sales. Online sales continue to boom, up 40%, and now contribute 1.3% to comparable-store sales. Most department stores are having success in online sales this year, but Macy's has been among the strongest and most consistent. Earnings also continue to be better than expected, despite analysts already increasing estimates for this quarter by almost 20% steadily throughout the year. Gross margins were roughly equal with last year (down 10 basis points), suggesting that competitive pricing pressures starting in the quarter were anticipated and well managed. Strong expense leverage occurred on the general expenses line, declining from 35.2% to 33.3%, which caused operating margins to increase from 6.7% to 8.5% year over year. Inventories were well controll ed and up only 4%, lower than the sales increase, which in addition to creating strong cash flow also bodes well for gross margins in the fall. The company increased its guidance modestly for earnings and same-store sales but says it remains cautious and the macro environment remains sluggish. We are encouraged that Macy's was not experiencing the snap in buying and in valuation that higher-end luxury retailers experienced and now may be well positioned to cater to the middle-class consumer, who is still shopping but needs to be offered value. |
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HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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| Posted: Wed May 11, 2011 12:13 pm Post subject: |
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Morningstar on M's fiscal 1Q earnings:
| Quote: | | Macy's M earnings more than tripled in the fiscal first quarter versus last year and were well ahead of our underlying and consensus expectations. We believe that solid operating improvements continue and that results also indicate some general middle-class consumer strength. We plan a small increase in our fair value estimate, as these results portend higher levels of long-term cash flows. In the quarter, sales increased 6%, or 5% on a comparable-store basis. Internet sales increased 38% and are now 1.3% of the total sales base. We find the Internet sales trends impressive since the company was lapping a 34% increase last year. Gross margins declined 30 basis points to 39.1%, but this is also a solid result as 2010 gross margins were at all-time highs after merch andise liquidations in 2009. More important, sales and general expenses were well controlled and leveraged more than 200 basis points, well ahead of our model, and cash from operations was a positive $67 million this year compared with a use of cash of $149 million last year. We like to see cash generation even in seasonally weaker quarters. Also, inventories increased less than 5%, below the sales levels. We note that many other retailers are seeing inventory climb slightly ahead of sales recently as investments in inventory are still rebounding from the recession-driven lows of 2009. For the future, we see Macy's squeezing sales and profits out of its operating improvement strategy, which is essentially what we'd call retail execution 101: a regional merchandising and management structure, training salespeople, giving ownership at the store level to keep the floors neat and well merchandised, making local merchandise decisions, and coordinating what's working with other stores, among other components. What's important is that there is still improvement to be had, in our opinion, even if we are beginning to sound repetitive in mentioning it. In tests, the program has positive effects on comp-store sales for a number of years, and it has only just now finished rolling out to the full chain. |
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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| Posted: Tue Feb 22, 2011 6:27 pm Post subject: |
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Morningstar's latest outlook on Macy's:
| Quote: | | We plan a small increase to our fair value estimate for Macy's M as the national department store retailer gains traction with a number of operational improvements, which will drive up our 2011 numbers slightly. Company guidance for a 2011 comparable-store sales increase of 3% and earnings growth of 15% is in line with our revenue forecast and only a few pennies ahead of our earnings expectations. We believe management confidence is based on continued success of the My Macy's localization efforts and sales training, which we view as still having some runway, albeit getting smaller. Macy's shares are now trading close to our fair value estimate. In the fourth quarter ended Jan. 29, Macy's reported in-line earnings; sales results were already widely known, since the firm reports sales figures and updates guidance monthly. During the fourth quarter, gross margins declined 50 basis points, but the higher sales volume leveraged selling, general, and administrative expense 100 basis points, raising operating income to a solid 13.8% from 11.1% last year. Slightly lower taxes affected earnings by $0.02 per share, and the company is also excluding $0.04 of impairment charges, also included in the comparable quarter in 2009, but which we still view more as operating expenses than extraordinary, as the charges are related to reorganization and store closings. As store openings are decidedly muted, Macy's growth depends on same-store sales, which held on solidly in 2010 at 4.6% growth for the full year with total sales rising only 6.4% (same-store sales include a 1.1% increase due to online sales, which rose nearly 30%). We are optimistic that initiatives such as localization of merchandise, employee sales training, and other "retail 101" optimi zation efforts can still drive same-store sales higher in 2011, but sales increases from such efforts will become tougher each year as the low-hanging fruit has already been picked. Also, gross margins could become pressured on commodity costs in the back half of 2011; we already saw a slight dip in the fourth quarter of 2010. While SG&A should leverage again on the sales increase, additional human resources and related costs could be incurred as the retailer tries to continue the momentum of 2010 with My Macy's, sales training, and additional hiring. |
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rffrydr
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Joined: 30 Oct 2005
Posts: 16939
Location: Sunny California
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| Posted: Thu May 13, 2010 10:56 am Post subject: |
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Location, location, location....there's more than a little RE in Macy's. A little more every day 
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Today is the Tomorrow you worried about Yesterday! |
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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| Posted: Thu May 13, 2010 7:13 am Post subject: |
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Morningstar on Macy's 1Q earnings:
| Quote: | | Macy's M first-quarter results support our view that the company's recent restructuring efforts and push to localize merchandise in each store will provide a lift to sales while contributing to margin improvement this year. Management's 2010 sales and earnings forecast is up from the beginning of the year, as the top line has grown at a slightly faster pace than expected because of the recovery in consumer spending and positive response to the company's merchandising initiative. Although we were ahead of management's outlook at the start of the year, we plan to modestly increase our sales and earnings projections, given the solid first quarter. The change will not have a material impact on our valuation, and our fair value estimate remains intact. Total first-quar ter sales were $5.57 billion, a 7.3% increase from the prior year. Easy year-over-year comparisons (a 9.0% decline in first-quarter sales last year) coupled with strong online sales and improving trends in the Bloomingdale's and Macy's business led to the positive first-quarter momentum. Although we expect positive sales growth from Macy's in 2010, thanks to stabilizing demand for discretionary goods and the lapping of easier comparisons with the year-ago period, it could be choppy as consumers remain selective with their discretionary dollars. The company's move to align inventories and costs with current sales levels is paying off. Macy's gross margin improved 130 basis points to 39.4%, and selling, general, and administrative expenses were up a modest 2% from the year-ago quarter. Excluding one-time charges, Macy's reported an operating margin of 3.6% versus 0.5% in the first quarter of 2009. We like the more streamlined organization and expect the bottom line will contin ue to benefit from a more efficient operation in 2010. |
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HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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| Posted: Wed Aug 12, 2009 11:25 am Post subject: |
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Morningstar's latest notes on Macy's:
| Quote: | | Macy's M second-quarter results confirm our view that despite weak sales, the bottom line is benefiting from the company's recent efforts to restructure its organization. Sales and profits are trending a little better than we projected for the first half of the year, but we don't expect a material change to our fair value estimate. We do plan to revisit our uncertainty rating, however, as the company's financial position appears to be improving. Despite the 9.7% decline in same-store sales from the prior-year quarter, the company's move to align inventories and costs with lower sales is paying off, in our view. Selling, general, and administrative expenses were down 8.5% from the year-ago quarter because of the company's move earlier in the year to eliminate jobs and cut operating costs as part of its centralization effort. Excluding one-time charges, Macy's reported an operating margin of 5.5% versus 5.9% in the second quarter of 2008. We like the more streamlined organization and expect the bottom line will continue to benefit from the cost savings over the next couple of quarters. However, we project sales will remain weak through the remainder of the year as consumers remain cautious. |
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HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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