Macy’s Eyes Lower Holiday Sales Due To Inflation Pressure. Is Macy’s Stock A Buy?

Macy’s issued its forecast for the holiday season on Monday and now expects sales in the low-end to mid-point of $8,161 to $8,401 million. Adjusted diluted earnings per share are expected to be unchanged and in the range of $1.47 to $1.67.  Fourth quarter and full year results are expected in March.

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Sales of $5.2 billion declined 4% from the previous year’s $5.4 billion while earnings of 52 cents a share fell 58% from $1.23. The New York iconic store saw more buyers for its high-end products and aggressively reduced inventory through discounts. As a result inventory levels were up just 4% from a year ago. Macy’s also raised its annual earnings forecast to $4.07-$4.27 a share. Earlier, the retailer lowered its earnings forecast for the rest of the year to $4- $4.20 a share compared to its outlook of $4.53-$4.95 in May.

The long established retail store and New York favorite sells apparel, accessories, cosmetics, home furnishings and other consumer goods.

The New York-based retail giant’s brands include its flagship Macy’s and Bloomingdale’s as well as specialty stores like Bluemercury, Bloomingdale’s The Outlet and Macy’s BackStage. Its 786 stores are  spread across the U.S., Puerto Rico and Guatemala. Macy’s also runs an e-commerce segment and a mobile app.

Macy’s Technical Ratings Have Improved

Its Composite Rating of  74 shows some technical weakness compared to other stocks in the IBD database.  Its 3-month and 6-month exponential RS Ratings have risen to 84 and 91 respectively. The exponential ratings give more importance to recent weeks.

Macy’s ranks third in the department stores industry group. The group has moved up in ranking and holds a lofty 6th place among the 197 IBD industries, according to IBD Stock Checkup. Other stocks in the group include Sendas Distributor (ASAI), Dillard’s (DDS), Nordstrom (JWN) and Kohl’s ticker symb=KSS].

In its previous  quarter ended July 30, the company reported earnings of $1 per share compared to $1.29 in the second quarter of 2021.  Sales were $5.6 billion compared to $5.647 billion over the same period.

 

Macy’s Stock Surges After Earnings; Falls On Outlook

Macy’s stock broke above its resistance along the 200-day moving average after earnings.  However, after the latest updates on holiday sales, the stock has plunged below its 50-day line on large volume.

Except for the September quarter when fund outflows were strong, more funds have been buying shares of Macy’s, which is a favorable long-term sign.

That could help Macy’s stock after fourth quarter earnings. According to the CAN SLIM stock picking strategy, increasing institutional ownership is one of the key metrics of a stock’s strength.

Several index funds also own Macy’s shares, including the Invesco S&P Mid-Cap Value With Momentum Fund (XMVM) and Vanguard Small Cap ETF (VB).

Is Macy’s Stock A Buy Right Now?

Founded in 1858, Macy’s is one of the oldest companies in the retail apparel group. The company has a strong presence across the U.S. However, the company has plans of closing a total of 125 stores by 2023.

After its recent quarter and guidance, investors should be cautious about adding Macy’s to their portfolio in the near-term. However, after the downturn, it is possible that the bellwether retailer turns around.

Follow VRamakrishnan @IBD_VRamakrishnan on Twitter for more news on stocks.

 

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