Morgan Stanley analyst Alexandra Straton has maintained their neutral stance on M stock, giving a Hold rating today.
Alexandra Straton’s rating is based on a comprehensive analysis of Macy’s recent financial performance and future expectations. Straton acknowledges that Macy’s exceeded its fourth-quarter earnings per share (EPS) expectations, attributing the success to a balance of gross margin improvements and stringent expense management. This outperformance, however, was not entirely surprising given the low initial expectations and the positive pre-announcements from Macy’s peers in the retail industry. Despite this beat, Straton points out that Macy’s quarterly revenue trend remains relatively flat, with a 1% decline, signaling ongoing pressures within the business that the management is aiming to address through a new strategic framework.
The Hold rating also factors in the disappointing first-quarter guidance provided by Macy’s management, which fell short of Street estimates, reflecting anticipated declines in sales, gross margin, and selling, general, and administrative (SG&A) expenses. While the guidance suggests a challenging start to the fiscal year, Straton believes it may be conservative enough to allow for potential outperformance. The report indicates a belief in the possibility of upside to both top-line revenue and gross margin against management’s guidance. Straton considers Macy’s current initiatives, including footprint rationalization and growth efforts, as longer-term plays that are unlikely to significantly affect the profit and loss statement until at least 2025, thus maintaining expectations for the year 2024 largely unchanged. Consequently, Straton reaffirms an Equal-weight rating with a revised price target, reflecting a cautious but open stance on Macy’s stock.
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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.
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