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Macy’s Q2 Earnings Preview: Here’s What You Should Watch For

August 12, 2014 | About:

New York-based chic department store chain Macy’s, Inc.’s (NYSE:M) is geared to declare its second-quarter earnings on August 13. With the retail sector currently looking up, analysts expect Macy’s to come up with an impressive performance this time around. Let’s find out in details where the company is headed.

Strong Possibility of Top line Growth

According to analyst estimates, Macy’s could post remarkable revenue figures in the quarter, reaching a good $6.30 billion from $6.07 billion in the corresponding quarter last year. While the company’s full year guidance is 2.20%, the estimated growth rate of 3.80% for the quarter points out that Macy’s is prepared not only to realize the outlook but could also outperform it.

The company’s sales chart has shown an upward trend in the last few quarters, riding on the back of the retail sector’s success. It’s set to perform even better considering the fact that retail sector’s July sales reported by the U.S. Census Bureau is likely to climb 0.4%. The University of Michigan’s consumer survey is expected to go up from 81.8 points in July to 82.5 points in August on a scale of 100, indicating that people are shopping more.

In addition to that, the employment market presently looks hopeful and job opportunities are on the rise, as the economy’s gradually recovering. Jobless claims have dropped under 300,000 for two consecutive weeks, which appears to be a heartening graph. This would leave consumers with more disposable income, in turn contributing to the growth of the retail sector as well as the company.

Macy’s had put up a dissatisfactory show in the second quarter last year owing to inadequate marketing support. The company had come back with aggressive marketing plans in the subsequent quarter which had taken customers by storm. Similar plans are also into the play in the second quarter of this year. Moreover, the company expects that pent up demand from earlier in the year would drive growth.

Decline in store count doesn’t necessarily mean a business cut

Macy’s has witnessed a 1% fall in its store tally in the last four years; in spite of it, the company’s sales haven’t sunk. Even though a rising number of stores would mean greater business growth, Macy’s has displayed a unique feat of upping its revenue on account of better comparable store sales.

In 2010, the company had a total of 850 outlets, which decreased to 842 in 2011. The number fell even further to 841 in 2012, and 840 in 2013. During the period, however, comparable store sales soared 18%, helping the company garner higher revenues.

Bottom line could climb

In the wake of a confident market for the retail sector, Macy’s could earn decent profit margins. Analysts expect earnings to go up to $0.86 a share from $0.72 a share in the same quarter last year. The positive change of 19% would give a good boost to the retail giant. Full year outlook stands at $4.52 per share, which could be feasible for Macy’s.

Parting words

During a phase in which retail bigwigs like Sears Holdings (NASDAQ:SHLD) and J.C. Penney Company (NYSE:JCP) are facing sales challenges, Macy’s could report strong revenues in the quarter. As the retail market’s increasingly growing and the company has picked up and addressed its loose ends, the imminent result could be optimistic. Here’s hoping a great outcome.

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GuruFocus has detected 2 Warning Signs with Macy's Inc $M.
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