MACY’S INC. $23 - New York symbol M

MACY’S INC. $23 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 422.7 million; Market cap: $9.7 billion; Price-to-sales ratio: 0.4; Dividend yield: 0.9%; WSSF Rating: Average) operates 850 department stores under the Macy’s and Bloomingdale’s banners. It also sells goods over the Internet. The company recently let its store managers tailor more of their stores’ goods to local tastes. As well, Macy’s is selling more products promoted by celebrities, such as Martha Stewart. Both of these moves have helped attract more customers. In its fiscal 2011 second quarter, which ended July 31, 2010, Macy’s earned $0.35 a share. That’s up 75.0% from the $0.20 a share, excluding restructuring charges, that the company earned a year earlier. Sales rose 7.2% in the latest quarter, to $5.5 billion from $5.2 billion. Same-store sales rose 4.9%. Online sales jumped 28.1%. The company closed stores and spent less on renovations during the recession. It used the savings to pay down its long-term debt from $8.5 billion on January 30, 2010, to $7.5 billion on July 31, 2010. That’s still a high 77% of its market cap, but Macy’s improving cash flow will help it keep lowering its debt. Macy’s will probably earn $1.92 a share in the fiscal year ending January 31, 2011. The stock trades at just 12.0 times that estimate. Macy’s is a buy.

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