Macy's (M) is scheduled to report results of its second fiscal quarter before the market open on Wednesday, August 14, with a conference call scheduled for 9:30 am EDT. What to watch for:
1. TURNAROUND: Last year, Macy's CEO Jeff Gennette said he was "committed" to stabilizing its brick and mortar business, and that customers had been confused by "very complex" pricing. Macy's updated its strategic priorities for 2019 in February, saying it plans to renovate 100 more stores and further expand its selection online. Macy's also said it would invest in what it dubbed "destination businesses," dresses, fine jewelry, men's tailored apparel, women's shoes, beauty, and "big ticket." Further, Macy's plans to double the number of in-store pop-up market locations, build out its virtual reality furniture capabilities and slim down the upper management ranks. Beginning this year, the company expects the restructuring efforts to generate annual savings of $100M.
2. GUIDANCE: In May, Macy's backed its forecast for fiscal 2019, including earnings per share excluding settlement charges of $3.05-$3.25. Macy's also backed its forecast for net sales for the fiscal year of "approximately flat," with same-store sales on an owned plus licensed basis flat to up 1% and SSS on an owned basis flat to up 1%. Analysts currently expect the company to report FY19 EPS of $3.07 on revenue of $24.89B. Macy's said it was "on track" to deliver on its annual top and bottom-line guidance and that it expected same-store sales performance to be "relatively consistent" throughout the year. Following the earnings report, Morgan Stanley analyst Kimberly Greenberger said the 11c EPS beat in Q1 compared to consensus was driven by lower taxes, real estate gains and credit card revenue growth outperformance. However, she estimated that Macy's had a 0% core retail operating margin in Q1 and noted that its trend of shrinking core retail EBIT dollars, which began in 2015, has continued. The company's same-store comparisons were the easiest of the year in Q1 and Macy's laps significantly more difficult comparisons in the second half, said Greenberger, who sees "little room for error."
3. COMPETITIVE LANDSCAPE: Macy's has been faced with competition from fast-fashion retailers like H&M, as well as an increase in online shopping on Amazon.com (AMZN). Jefferies analyst Stephanie Wissink earlier this year that Amazon's launch of a value priced private label skincare brand, Belei, "came as a bit of a surprise," adding that her sense from contacts inside and outside of the e-commerce company is that the launch is meant to establish a stronger presence, refine a more robust beauty platform and provide data to improve access to national brands. In May, Barron's Avi Salzman wrote that last earnings season was "tough" on retailers, with department stores being hit particularly hard.
Keywords: earnings, results, quarterly results, guidance, analyst commentary, earnings watch