The U.S. economy is reeling under the ongoing financial crisis, which has gradually engulfed the global market. Amid this unstable environment, 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 throughout the year. The company has been relentlessly striving to keep itself on the growth trajectory, while keeping an upbeat note amidst the lackluster economy.
Riding on Positive Comps
Between January to July 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 3.6%.
In the first seven months of 2012, comps increased 2.4% in January, 4.6% in February, 7.3% in March, 1.2% in April, 4.2% in May, 1.2% in June and 4.1% in July.
Given the soft economic retrieval, monthly sales data for Macy’s also portrayed a decent performance. The company, in the span of January to July 2012, registered a minimum sales growth of 0.4% and a maximum growth of 6.9%, reflecting an average growth of approximately 3.5% for the period. In the first seven months, sales growth was 2% in January, 5.5% in February, 6.9% in March, 0.4% in April, 4.1% in May, 0.8% in June and 5.1% in July.
Macy’s departmental 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.Read the Full Research Report on M
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