Macy’s Inc. $23 - New York symbol M

MACY’S INC. $23 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 420.5 million; Market cap: $9.7 billion; WSSF Rating: Average) operates 850 department stores under the Macy’s and Bloomingdale’s banners. Macy’s now aims to cut its annual expenses by $100 million with a new restructuring plan, including consolidating seven of its regional offices into four centers. Due to these restructuring costs, Macy’s lost $0.14 a share (total $59 million) in the three months ended May 3, 2008. It earned $0.11 a share ($52 million) a year earlier. If you exclude all unusual items, earnings per share fell 87.5%, to $0.02 from $0.16. Sales in the quarter fell 3.4%, to $5.7 billion from $5.9 billion. Same-store sales declined 2.6%. Macy’s hopes to spur sales of children’s merchandise and to increase customer traffic with a new alliance with toy retailer FAO Schwarz, which will operate toy stores inside roughly 700 Macy’s stores. Macy’s should earn $1.94 a share before restructuring costs in fiscal 2009, and the stock trades at 11.9 times that estimate. It also trades at 0.4 times its sales of $60 a share. The $0.53 dividend yields 2.3%. Macy’s is a buy.

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