Topic: How To Invest

Online sales help Macy’s compete with discount chains

Online sales help Macy’s compete with discount chains

High unemployment and gasoline prices have hurt U.S. consumer spending and prompted shoppers to shift to discount and warehouse chains. That’s putting pressure on department stores.

Here is how one of America’s most renowned department stores is seeking to overcome the slowdown in consumer spending.

MACY’S INC. (New York symbol M, operates 840 Macy’s and Bloomingdale’s department stores in 45 states.

The company continues to benefit from strong online sales. That’s largely because it is offering free shipping and letting customers pick up their orders at its stores. Macy’s recent move to tailor its merchandise to local tastes is also helping it compete.

Even so, Macy’s sales fell 0.8% in the second quarter of its 2014 fiscal year, which ended August 3, 2013, to $6.07 billion from $6.12 billion a year earlier. Same-store sales, which include online orders, also declined 0.8%.

Stock market investment: Macy looks to give greater support to online operations

Earnings rose 0.7%, to $281 million from $279 million. Per-share earnings rose 7.5%, to $0.72 from $0.67, on fewer shares outstanding.

Due to slowing consumer spending, the company now expects its same-store sales to rise 2% to 2.9% for all of fiscal 2014. That’s down from its earlier prediction of a 3.5% rise

Macy’s is making several moves to support its growing online operations. These include expanding a warehouse in Arizona and installing terminals in its stores that let customers place orders for merchandise they can’t find on the shelves.

In May of this year, Macy’s raised its quarterly dividend by 25.0%, to $0.25 a share from $0.20. The new annual rate of $1.00 yields 2.3%. The company also added $1.5 billion to its share repurchase authorization. It can now buy back up to $2.6 billion of its stock, which is equal to 14% of its $18.7-billion market cap. There is no time limit for these purchases.

In the latest edition of Wall Street Stock Forecaster, we look at whether Macy’s new sales initiatives will improve its earnings and let it keep raising the dividend. We conclude with our clear buy-hold-sell advice on the stock.

(Note: If you are a current subscriber to Wall Street Stock Forecaster, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow members

In recent years, there have been more insistent calls for North Americans to reduce personal and household debt. Do you think this will hurt consumer stocks? Or do you believe people will continue to assume a significant amount of debt to buy what they want?


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