Macy’s (M) is not just another fixture of the American mall; it’s been around for over 160 years and has amassed 680 stores for its brand of affordable quality fashion. It was such a popular retailer that the company coined itself as “America’s store for life.”
However, that might not be the case anymore. Based on the company’s second-quarter earnings report, which was released on August 14, it seems that shoppers may be moving on from their “store for life.”
For the second quarter, the company missed on both the top and bottom lines. Adjusted earnings per share declined a whopping 60% year-over-year to $0.28 on $5.5 billion in revenue. Analysts had expected adjusted earnings of $0.45 — so Macy’s came in way below target there — as well as revenue of $5.6 billion. This represents a 38% earnings miss and about a 2% sales miss.
In addition, company management slashed its forecast for full-year fiscal 2019. It now expects earnings of $2.85–$3.05 per share, versus the previously guided $3.05–$3.25 per share.
Company management is trying to get back on track by discounting most of its spring inventory to make room for next season’s apparel. Macy’s CEO Jeff Gennette believes that this also will prepare the company for demand for the fall season.
In addition, Macy’s is going to continue to expand its vendors and SKUs, as well as continue with its “mobile first” strategy. Going forward, the mobile app will have more feature enhancements, such as quickly picking up orders, easier access to recommendations and offers, and even connecting customers with Macy’s stylists.
The company also plans to partner with thredUP, a fashion resale marketplace, in hopes to connect to millennials and the new generation who focus on sustainable fashion.
Unfortunately, the company’s strategy moving forward was not enough to save the stock on this earnings report. The shares opened up about 15% lower the following morning and failed to find their footing for the rest of the week.
Let’s take a look at its Report Card below with all the details.
Why the Portfolio Grader Said to Stay Away
Given the weakening earnings momentum, sales growth and cash flow, it’s no surprise that Macy’s is a Strong Sell. Earnings and margin growth are also weak, so the Fundamental Grade receives a C-rating here. And the Quantitative Grade, which indicates buying pressure, comes in at an F rating, which is downright awful. Clearly, the smart money is staying far away from this retailer.
Macy’s isn’t the only stock I’m warning you against. In fact, there are plenty of other stocks that contain red flags. That is why it’s important to avoid them as much as possible, especially since there is a MAJOR market shift underway.
The moves you make in the next few weeks could make or break you for the remainder of the year. So, by clicking here, you’ll learn about my secret for finding the best income stocks on the planet and how to both profit and protect yourself in this tricky market.