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Macy’s Blowout Earnings a Reason for Holiday Cheer: Johnson

Pras Subramanian

Shares of Macy’s (M), the second largest department store chain in the U.S., soared today as the retailer posted third-quarter earnings that easily beat Wall Street expectations. With a nice quarter for Macy’s in the books, investors are getting a bit of optimistic news ahead of the all-important holiday season for retailers.

“Those are surprising numbers,” says Hugh Johnson, CIO and founder of HJ Advisors, in the attached video clip. Analysts covering Macy’s most likely had a similar reaction, as the company's earnings of 47-cents a share topped street estimates by 8 cents. Topline revenue also beat, with Macy’s reporting sales of $6.28 billion, besting the consensus estimate of $6.19 billion.

Macy’s numbers and third-quarter earnings overall are showing Johnson that “this economy seemed to manage the shutdown and debt ceiling debate very well.” In fact, Macy's all important same-store comparable sales were up 3.5% during the government shutdown-plagued quarter, beating street estimates of 2.1%.

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Despite guarded optimism, if not downright skepticism, by some market watchers for retail earnings in the fourth quarter, Johnson surmises that there will likely be reason for holiday cheer. “I know everyone’s guarded about what Christmas sales are looking like, but they look like they’re going to be a lot better than anyone expected.”

In fact, Johnson believes it isn’t too early to read into this past quarter’s results for a peek at Q4 performance. “I don’t remember a Christmas season when we started the season with a fairly low and very guarded estimate for what the season would look like, and it [didn’t come] in better than expected."

"And if you‘re asking me based on the Macy’s numbers...what are the chances that Christmas could be better this year," he continues, "my answer is that there is a very strong chance of it that this is going to be a repeat of the pattern we’ve seen in prior years."

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