By Tomi Kilgore
Macy's Inc. is scheduled to release fiscal third-quarter results
on Wednesday before the market opens. Investors will be watching to
see if Macy's can continue to fight off the challenges the retail
sector has faced this year, including a decline in traffic and
stingy consumers.
EARNINGS FORECAST: Macy's is expected to report a profit of 50
cents a share for the quarter ended in October, according to the
average estimate of analysts surveyed by FactSet, up from 47 cents
a share, in the same period a year ago. The estimate has declined
from 53 cents a share at the end of July.
Macy's missed earnings expectations when it reported fiscal
second-quarter results on Aug. 13, but it had exceeded forecasts
during the previous three quarters, and during 11 of the past
12.
REVENUE FORECAST: Total sales are expected to rise to $6.34
billion from last year's $6.28 billion. Same-store sales, or sales
of stores open for at least a year, are projected to rise 1.3%.
Macy's missed both total and same-store sales expectations for
the past three quarters, and for five of the past six.
STOCK PERFORMANCE: After a strong start to the year, Macy's
stock has been stuck in a seesaw-like holding pattern for most of
the past seven months. Outside of a brief spike higher in late
August, when the shares closed at an all-time high of $62.59 on
Aug. 26, the stock is roughly where it was at the beginning of
April.
But given the rally it enjoyed during the first three months of
the year, the stock has climbed 10% in 2014 through midday trade on
Tuesday, compared with a 1.9% rise in the SPDR S&P Retail
exchange traded fund and a 10% gain in the S&P 500.
WHAT TO WATCH:
--BACK-TO-SCHOOL: Some recent monthly sales reports from
retailers suggest that while the back-to-school selling season
started off strong, the selling environment became much tougher as
the quarter progressed.
"Specifically, October sales [for department store chains] were
softer than the balance of the quarter," Stifel Nicolaus analyst
Richard Jaffe wrote in a research note to clients. He's worried
that same-store sales could miss expectations, again, as the
consumer reacts to the lack of a strong fashion trend and
uncertainties regarding economic growth.
--OUTLOOK: With that in mind, investors may be skeptical about
the company's ability to maintain its fiscal 2014 targets for
same-store sales growth of 1.5% to 2%, and for earnings per share
in the range of $4 to $4.50. That said, the stock could get a boost
if Macy's keeps its outlook intact.
--MARGIN DENT: Among some other key metrics to watch, Nomura
analyst Robert Drbul expects gross margin to slip by 0.2 percentage
points to 39%, while costs as a percent of revenue are seen
dropping 0.4 percentage points to 33.0%.
Stifel's Mr. Jaffe said he'll also be waiting for comments
regarding the company's plan for holiday pricing and promotions,
and on inventory levels for the third quarter and the outlook for
the current quarter.
-Tomi Kilgore; 415-439-6400; AskNewswires@dowjones.com
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