Topics Growth Stocks

Macy’s Inc. $35 - New York symbol M

MACY’S INC. $35 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 308.4 million; Market cap: $10.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 4.3%; TSINetwork Rating: Average; www.macysinc.com) operates 870 Macy’s and Bloomingdale’s department stores and sells goods online.

In its fiscal 2017 first quarter, which ended April 30, 2016, the company’s sales fell 7.4%, to $5.8 billion from $6.2 billion a year earlier. It closed 41 stores in 2015. Even so, same-store sales fell 6.1%. That’s mainly due to weaker demand for clothing and related items. As well, fewer tourists are visiting Macy’s flagship store in New York City.

Earnings in the quarter dropped 39.9%, to $116 million from $193 million. Due to fewer shares outstanding, per-share earnings fell at a slower rate of 33.9%, to $0.37 from $0.56. Excluding a charge related to its employees’retirement plans, the company earned $0.40 a share in the latest quarter.

Macy’s aims to spur sales with several initiatives. These include opening more stores— both its Macy’s Backstage (discount) and Bluemercury (high-end cosmetics). It also plans to launch new exclusive clothing brands. In addition, the company will improve its in-store and online customer support.

Macy’s now expects to earn $3.15 to $3.40 a share for fiscal 2017, down from its earlier range of $3.80 to $3.90 a share. The stock trades at a low 10.7 times the midpoint of the new range.

Despite the weaker earnings forecast, the company recently raised its dividend by 4.9%. The new annual rate of $1.51 a share yields 4.3%.

Macy’s is still a hold.

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