Amidst an uneven economic recovery, Macy’s Inc. (M) has been able to maintain a decent sales run so far in 2012, and we believe it will carry the same momentum over the year. The company has been relentlessly endeavoring to keep itself on the growth trajectory, while keeping an upbeat note in an economy that still lacks luster.
Riding on Positive Comps
During a period from January to May 2012, Macy’s has consistently registered comparable-store sales growth. In that period, comps growth touched a low of 1.2% and hit a high of 7.3%, thereby recording an average growth of approximately 3.9%. In the first five months of 2012, comps increased 2.4% in January, 4.6% in February, 7.3% in March, 1.2% in April and 4.2% in May.
April sales were anticipated to be softer on account of the shift in Easter and the cosmetic event to March this year from April in the prior year. Moreover, the timing of Mother’s Day in the latter part of May also proved unfavorable for April sales.
Given the soft economic retrieval, monthly sales data for Macy’s also portrayed a decent performance. The company, in the span of January to May 2012, registered a minimum sales growth of 0.4% and a maximum growth of 6.9%, reflecting an average growth of approximately 3.8% for the period. In the first five months, sales growth was 2% in January, 5.5% in February, 6.9% in March, 0.4% in April and 4.1% in May.
Let’s Conclude
Macy’s department stores sell a wide range of merchandise. Its products include men’s, women’s, and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods.
In an attempt to increase sales, profitability and cash flow, the company has been taking steps such as integration of operations, consolidation of divisions, customer-centric localization initiatives, as well as developing e-commerce business and online order fulfillment centers. Moreover, Macy’s continues to focus on price optimization, inventory management and merchandise planning to drive traffic.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may negatively impact their discretionary spending, and in turn the company’s growth and profitability.
Macy’s, which competes with J. C. Penney Company Inc. (JCP), Dillard’s Inc.(DDS) and Saks Incorporated (SKS), currently operates approximately 840 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.
Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Macy’s holds a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.
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