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Shares of Macy's M popped over 1.5% on Thursday to inch closer to their 52-week high as investors begin to assess the possibility of a brighter future for the much-maligned retailer.
Some of the most recent Macy’s positivity might be attributed to President Donald Trump’s renewed public attack on Amazon AMZN, based on what he views as unfair tax treatment toward the e-commerce powerhouse.
The validity of these concerns aside, Macy’s has to do far more than bank on any Amazon downturn. Luckily for investors, the department store has indeed made improvements to its business that might warrant investor consideration.
Macy’s announced last week that it is set to debut app-based mobile checkout at locations around the country, designed to decrease wait times. The company is also expected to roll out a new augmented reality furniture shopping feature that will be accessible through the Macy’s app as early as April.
These moves are part of a bigger digital push that includes offerings such as Amazon-like locker pickups for online sales, which have led to real results.
The fourth quarter marked the 34th-straight quarter in which Macy’s posted double-digit growth in its digital business. Meanwhile, the company’s overall Q4 revenues climbed by 1.8% to reach $8.67 billion, with comps up 1.4%. Macy’s adjusted earnings surged nearly 40% from the year-ago period and also beat our Zacks Consensus Estimate.
Recent Price Performance
Shares of Macy’s have dipped slightly since the company reported its Q4 earnings results last month. However, this shouldn’t detract from the bigger picture, as Macy’s stock has soared over the last six months, outpacing its industry’s average.
Investors should also note that, despite Macy’s recent price performance strength, the company has consistently traded at a substantial discount to its industry’s average. Macy’s Forward P/E of roughly 8.2 also marks a discount to direct rivals Dillard’s DDS and Kohl’s KSS, which are currently trading at roughly 13x forward earnings.
Macy’s has earned seven earnings estimate revisions, with 100% agreement to the upside, all within the last 60 days. This has raised the retailer’s full-year earnings estimate from $2.80 per share to $3.63 per share.
Our latest Zacks Consensus Estimates are calling for Macy’s first-quarter earnings to soar by 50% to hit $0.36 per share. The retailer’s Q1 revenues are projected to reach $5.42 billion, which would mark a more modest 1.5% climb.
Macy’s has been able to fight through some rough times and has seen its shares surge accordingly. The retailer has also committed to improving its e-commerce business and deployed some app-based innovations aimed at sparking continued growth.
Furthermore, the department store bellwether is trading at a discount to some of its biggest competitors and is trading at an even more attractive valuation than it was just a month ago.
Coupled with the fact that Macy’s stock is currently a Zacks Rank #1 (Strong Buy) and sports an “A” grade for both Value and Growth in our Styles Scores system, now might be an intriguing time to buy.
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