Zacks Estimates for Macy's Decline

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Macy’s Inc.’s (M) recent announcement of trimming its fourth-quarter fiscal 2012 earnings guidance triggered a downward trend in the Zacks Consensus Estimates. A negative sentiment was palpable among the analysts covering the stock who tweak their estimates to better align with the company’s projection.

The Cincinnati, Ohio-based company, which saw its December 2012 comparable-store sales rising 4.1%, now expects its fourth quarter earnings between $1.91 and $1.96 per share, down from $1.94 to $1.99, forecasted earlier. This department store retailer also lowered its comparable-store sales guidance to a range of 3% to 3.5% from 4.2% predicted previously.

Management stated that sales for the first two months of the fourth quarter remained below expectations as results were dampened by the impact of Hurricane Sandy and lingering economic concerns. This compelled management to revisit their earnings outlook.

Consequently, the Zacks Consensus Estimates have been portraying a downtrend. The Zacks Consensus Estimate for the fourth quarter dropped 2% to $1.95 per share, as 5 out of 7 estimates were revised downwards in the last 7 days. For fiscal 2012, 3 of 13 estimates were lowered over the same timeframe, leading to a marginal decline of 0.3% in the Zacks Consensus Estimate to $3.39 per share.

Macy’s, which competes with J. C. Penney Company Inc. (JCP) and Dillard’s Inc. (DDS), holds a Zacks #3 Rank that translates into a short-term Hold rating. We believe that the downward revision in the Zacks Consensus Estimates may push the Zacks Rank down in the coming days.

Currently, we maintain our long-term Neutral recommendation on Macy’s with a target price of $43.00, as frugal shoppers and a soft economic recovery still remain causes of concern. However, the company has been initiating several strategies to bolster its sales, profitability and cash flow, which include Omnichannel strategy, integration of operations, developing e-Commerce business, and expansion of product offerings.

The company also remains committed to strengthening the online presence of both its Macy's and Bloomingdale's brands. Online sales, which include sales from macys.com and bloomingdales.com, surged 51.7% in December 2012.

Macy’s currently operates approximately 840 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

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