Add Macy's (M) as You Reshuffle Your Portfolio for 2022
The market is trying to cope with the headwinds related to inflation, supply-chain issues and tensions between Russia and Ukraine. So, smart investment is the only way to stay afloat. The right choice of stocks may fetch you higher returns even amid the changing market dynamics. To that end, we present you with Macy's, Inc. M, which looks well-poised, given its sound fundamentals and growth efforts.
Macy's, one of the nation’s premier omnichannel retailers, has exhibited a decent run on the bourses in the past year. Thanks to its operational initiatives, such as strengthening omni-channel solutions, expanding customer reach and deepening focus on brand innovation, the stock has outpaced the Zacks Retail - Regional Department Stores industry in a year. Shares of this New York-based player have rallied 54.2% compared with the industry’s rise of 36.1% in the said period.
Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimates for the current and next financial year have increased 6.1% and 7.3% to $4.33 and $4.24, respectively, over the past 60 days. This currently Zacks Rank #2 (Buy) stock’s long-term earnings growth rate of 12% highlights its inherent strength. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Drivers
Macy's is contantly benefiting from efforts undertaken as part of its Polaris Strategy, including boosting assortments, strengthening customer relations, accelerating digital growth, optimizing store portfolio and reducing costs. M has been witnessing sturdy growth for a while across all its three brands, namely Macy’s, Bloomingdale’s and Bluemercury.
Management is on track to strengthen its omni-channel capabilities with investments toward online shopping experiences, data and analytics, technology infrastructure as well as better fulfillment capabilities. Macy’s’ expanded omni-channel offerings, such as curbside, store pickup and same-day delivery bode well.
During the fourth quarter of fiscal 2021, Macy’s digital sales increased 12% from the year-ago quarter’s figure. The metric was up 36% from the fourth-quarter fiscal 2019 levels. Digital sales represented 39% of net sales. Approximately, 63% of digital demand sales came from mobile devices. Stores fulfilled 28% of the digital sales in the quarter. Management anticipates digital sales to be about 37% of the net sales for fiscal 2022.
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Macy's came up with a host of initiatives to deliver customers a seamless shopping experience. Its tie-up with DoorDash for expediting the delivery service is yielding results. M also collaborated with Sweden-based buy-now, pay-later group Klarna to offer its online customers financial ease and payment flexibility. The company added PayPal and Venmo payment options. It is constantly improving its mobile and website features to enhance the shopping experience.
Macy’s plans to launch a curated digital marketplace to strengthen its omnichannel retailing capabilities. The new marketplace will expand Macy’s assortment significantly and help introduce categories and brands by enabling the third-party merchants to sell products on macys.com and bloomingdales.com. To power the platform, Macy’s partnered with Mirakl, a leading enterprise marketplace technology company. The platform is anticipated to be launched in the second half of 2022.
Management cited that the marketplace platform will accelerate the Polaris Strategy and help tap new opportunities. Macy’s foresees its digital business to generate $10 billion in sales by fiscal 2023. Additonally, the new digital marketplace platform is expected to produce incremental revenues.
Macy’s continues to invest in physical stores to support its digitally-led omnichannel business model and adds eight off-mall format stores (Market by Macy’s, Freestanding Backstage, Bloomie’s and Bloomingdale’s Outlet) across the Dallas, Atlanta and Washington D.C. markets in fiscal 2021. M is aiming at around 10 off-mall locations for fiscal 2022.
3 More Stocks Looking Red Hot
Here are three more top-ranked stocks, namely Kohl's Corporation KSS, Costco COST and Target TGT.
Kohl's Corporation, an omnichannel retailer, currently carries a Zacks Rank #2. KSS’s bottom line outperformed the Zacks Consensus Estimate by 4.8% in the last reported quarter.
The Zacks Consensus Estimate for Kohl's Corporation’s current financial year sales suggests growth of 2.5% from the year-ago period’s reading. KSS has an expected EPS growth rate of 8% for three-five years.
Costco, which operates membership warehouses, carries a Zacks Rank of 2 at present. COST has a trailing four-quarter earnings surprise of 13.3%, on average.
The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 13.3% and 17.4%, respectively, from the corresponding year-ago period’s actuals. COST has an expected EPS growth rate of 9.1% for three-five years.
General merchandise retailer Target is currently Zacks #2 Ranked. TGT has an expected EPS growth rate of 16.5% for three-five years.
The Zacks Consensus Estimate for Target’s current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the corresponding year-ago period’s levels. TGT has a trailing four-quarter earnings surprise of 21.3%, on average.
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Macy's, Inc. (M) : Free Stock Analysis Report
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