What Macy’s Got Right in Q1

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Macy’s Inc. (NYSE: M) reported its fiscal first-quarter financial results before the markets opened on Wednesday. The company said that it had $0.48 in earnings per share (EPS) on $5.54 billion in revenue, which compares with consensus estimates from Thomson Reuters of $0.35 in EPS on revenue of $5.39 billion. In the same period of last year, the retailer said it had EPS of $0.24 and $5.34 billion in revenue.

During the quarter, Macy’s noted that comparable sales on an owned basis were up 3.9% compared to the first quarter of 2017. On an owned-plus-licensed basis, comparable sales were up 4.2% in this quarter.

The company has set a new approach to its business in China. Macy’s has come to a mutual agreement to end the joint venture with Fung Retailing. Macy’s will remain active on Alibaba’s e-commerce platform TMall, as well as social media channels. The Macy’s e-commerce team in San Francisco will manage the ongoing China business, with operational support from Fung Omni in Shanghai.

Looking ahead to the fiscal full year, the company now expects EPS in the range of $3.75 to $3.95, and comparable sales on an owned-plus-licensed basis are expected to increase between 1% and 2%. Consensus estimates call for $3.61 in EPS on $24.73 billion in revenue for the year.

Jeff Gennette, Macy’s board chair and chief executive, commented:

Macy’s, Inc.’s results for the first quarter of 2018 reflect continuing momentum in the business. We exceeded our expectations and saw strong performance across all three brands—Macy’s, Bloomingdale’s, and Bluemercury—as well as across all geographic regions and families of business. We are maintaining a healthy inventory position, which helped us deliver improved gross margin. The winning formula for Macy’s, Inc. is a healthy brick & mortar business, robust e-commerce and a great mobile experience. While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business. Our best customer is responding well to the improvements we’ve made to her experience in our stores, on .com and through the Macy’s app.

Shares of Macy’s closed Tuesday at $29.93, with a consensus analyst price target of $29.71 and a 52-week trading range of $17.41 to $32.45. Following the announcement, the stock was up about 9% at $32.62 in early trading indications.