On a relatively quiet day for the market, shares of Macy’s Inc. (M) are falling 13% after the department store operator posted first-quarter results. Is this a sign of more trouble to come, or is this an opportunity to buy on the dip? Let’s dig into the details.
Compared with Q1 2016, sales at Macy’s stores open a year or longer fell 4.6%. This was a steeper drop than expected; analysts were forecasting a 2.7% drop in same-store sales. Macy’s also reported $5.34 billion in revenue, which was well below analysts’ estimates of $5.47 billion.
Meanwhile, quarterly earnings plunged 39% year-on-year on higher inventory and falling sales. Adjusted earnings per share was $0.24, which missed the $0.35 consensus EPS estimate by 31.4%.
To add insult to injury, Macy’s expects that same-store sales will fall between 2% and 3% in FY 2017. Total sales are expected to fall anywhere from 3.2% to 4.3%. Adjusted earnings per share are expected to range between $2.90 and $3.15 per share. Macy’s earnings outlook is well below the Street view of $3.45 earnings per share.
The fact remains that Macy’s is no longer as profitable or popular as it used to be. And it doesn’t appear that this will be changing anytime soon. Keeping this in mind, I consider M an F-rated Strong Sell.