Macy’s Holds Steady Amidst Transformation and Mixed Financial Indicators

TD Cowen analyst Oliver Chen has reiterated their neutral stance on M stock, giving a Hold rating yesterday.

Oliver Chen has given his Hold rating due to a combination of factors including Macy’s recent performance and strategic initiatives. While Macy’s reported better-than-expected savings in selling, general, and administrative costs, their gross margin underperformed compared to the Street’s expectations. Macy’s has raised their full-year 2024 guidance, reflecting the positive impact of the recent quarter’s results. Chen notes the increased conversion rates, traffic, and customer satisfaction at Macy’s First 50 stores, which are part of the company’s efforts to modernize and improve efficiency. However, he remains cautious due to the challenges in the apparel sector, potential impacts of private label changes, the scalability of the First 50 store improvements, and the necessity for promotional activities due to seasonal inventory concerns.

The Hold rating also stems from the company’s ongoing transformation, which Chen describes as a “less is more” approach, focusing on optimizing their store portfolio and modernizing their apparel offerings. The emphasis on enhancing customer lifetime value through improved loyalty programs, pricing strategies, and supply chain management is viewed as a positive step towards supporting profitability. Furthermore, the initial success of the First 50 pilot stores offers a glimpse into Macy’s potential. These stores, which are central to Macy’s ‘Go Forward’ project, have shown promising results with better comparative sales and improved conversion rates, thanks to merchandising improvements across both online and physical stores. Nonetheless, Chen believes that consistent execution over several quarters will be required before a more optimistic view of the stock can be justified. This caution is due to the significant investments needed in product and stores, the uncertain trajectory of traffic trends, and the ongoing transformation of the private brand portfolio, despite the raised earnings per share guidance which was primarily driven by expense savings.

In another report released yesterday, Telsey Advisory also maintained a Hold rating on the stock with a $21.00 price target.

TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.

Macy’s (M) Company Description:

Macy’s, Inc. engages in the retail of apparel, accessories, cosmetics, home furnishings, and other consumer goods. Its brands include Macy’s, Bloomingdale’s, and Bluemercury. It offers men’s, women’s, and children’s apparel, women’s accessories, intimate apparel, shoes, cosmetics, fragrances, as well as home and miscellaneous products. The company was founded by Rowland Hussey Macy Sr. on March 6, 1929 and is headquartered in Cincinnati, OH.