The latest sell-off in Macy’s (M) shares presents a buying opportunity for investors, Jefferies analysts said in a Thursday note.
The department store chain operator’s stock plummeted nearly 13% Wednesday after its Q2 sales missed analyst expectations amid increased pressure on the consumer.
The report showed that Macy’s comparable sales fell 4.0% in the quarter, falling short of the consensus estimate of a 0.9% decline.
Net sales totaled $4.94 billion, representing a 3.8% year-over-year decrease and coming in below the company’s guidance range of $4.97 billion to $5.1 billion, as well as the consensus estimate of $5.06 billion.
Earnings per share (EPS) were reported at $0.53, ahead of consensus expectations. The beat was driven by cost-cutting measures, Jefferies noted.
Despite worse-than-expected Q2 print, Jefferies analysts point out that Macy’s saw improvement in the second half of July after management took measures to ramp up promotion and marketing efforts, as well as address inventory issues.
“2H should also benefit Y/Y from improved in-stocks and digital,” analysts said. “The company showed commitment to profitability by cutting costs,” helping it reiterate its EPS outlook.
With valuation significantly lower than peers and the 10-year average, any near-term progress with initiatives and support for even flat growth following store closures could result in “outsized multiple expansion,” analysts said.
Macy's (NYSE:M) reported a gross margin of 40.5% in Q2, an improvement from last year's 38.1% and higher than the projected 39.8%. Inventory levels reached $4.38 billion, reflecting a 6% increase year-over-year and surpassing the estimated $4.21 billion.
For the full year, Macy’s anticipates EPS between $2.55 and $2.90, aligning closely with the consensus estimate of $2.78.
However, the company has revised its net sales forecast down to a range of $22.1 billion to $22.4 billion, compared to the previous guidance of $22.3 billion to $22.9 billion, with the consensus estimate at $22.66 billion.