Macy's Sees Thriving Exit from '11 - Analyst Blog
December 21 2011 - 9:45AM
Zacks
Macy’s Inc. (M)
continues with its positive rhythm as it successfully approaches
the end of another year, and we believe it will sustain the tempo
as it enters 2012. The company’s relentless endeavors to keep
itself on a growth trajectory have paid off.
Riding on Positive
Comps
From January to November 2011,
Macy’s has consistently registered comparable-store sales growth
touching a low of 0.9% (in March) and reaching a high of 10.8% (in
April), thereby recording an average growth of approximately
5.1%.
This is far better than its
competitor J. C. Penney Company Inc. (JCP), which
witnessed an average comps growth of a meager 0.8% in the same
period. Between January and November 2011, J. C. Penney’s
comparable-store sales fell as low as 2.6% (in October) and rose as
high as 6.4% (in February and April).
Monthly sales data has also been
encouraging for Macy’s, which has seen consistent growth. From
January through November 2011, the company registered a minimum
sales growth of 1.6% (in March) and a maximum growth of 10.9% (in
April), compared to J. C. Penney, which experienced a steep sales
decline of 6.6% (in October) and an increase of 3.4% (in
April).
Black Friday Sales
Bring Cheers
The Black Friday weekend sales
brought cheers for retailers such as Macy’s, Saks
Incorporated (SKS), Ross Stores Inc.
(ROST) and Limited Brands Inc. (LTD), which went
on to post better-than-expected November comparable-store sales
growth of 4.8%, 9.3%, 5% and 7%, respectively. Early hour store
openings, huge discounts, promotional activities and free shipping
on online purchases were enough to woo customers on Black Friday,
which turned out to be a bonanza for both brick-and-mortar as well
as e-commerce retailers.
The saying "early bird catches the
worm" goes well with Macy’s. For the first time, the retailer
opened its doors at the stroke of midnight on Black Friday to
attract customers.But J. C. Penney could not make the most of this
opportunity. It followed its old tradition of opening stores at 4
a.m. on Black Friday. The decision hurt J. C. Penney’s November
comparable-store sales, which were down 2%.
Where Lies the
Strength
Macy’s sustained focus on price
optimization, inventory management, merchandise planning and
private label offering positions it to drive traffic, meet
customer-oriented demand and improve the shopping experience.
In an attempt to increase sales,
profitability and cash flows, the company has been taking steps
such as integration of operations, consolidation of divisions as
well as developing the e-commerce business and online order
fulfillment centers.
Online sales, which include sales
from macys.com and bloomingdales.com, continued to show growth
momentum in November, soaring 49.6%. With the innovation of new
technologies, consumers have also advanced and are now using
smartphones and tablets to search for merchandises and grab the
best available deal, instead of going from shop to shop.
Consequently, the company seeks to expand both Macy's and
Bloomingdale's brands online. Year-to-date, online sales were up
40.9%.
We remain optimistic about the
company’s customer-centric localization initiative called “My
Macy’s”. The program aims at improving comparable-store sales and
reducing operating expenses, with stores and merchandise
assortments focused on local customer needs and preferences.
Let’s Wrap
Up
Macy’s department stores sell a
wide range of merchandise. Its products include men’s, women’s, and
children’s apparel and accessories, cosmetics, home furnishings and
other consumer goods.
After the Black Friday sales blast,
there is skepticism in the market about whether the success of
weekend sales will be replicated during Christmas and New Year, or
whether consumers who have now become more rational about spending
will tighten their purses. However, the efforts of retailers to
convert store traffic into business cannot be decried as they are
trying to lure customers. Given its track record, Macy’s appears to
be one of the forerunners.
Macy’s, which competes with
Dillard’s Inc. (DDS), currently operates
approximately 850 department stores in 45 states, the District of
Columbia, Guam and Puerto Rico.
The above analysis supports our
affirmative view on the stock, and therefore we currently have a
long-term Outperform recommendation on it. Moreover, Macy’s holds a
Zacks #1 Rank that translates into a short-term ‘Strong Buy’
rating, and correlates with our long-term view.
DILLARDS INC-A (DDS): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
SAKS INC (SKS): Free Stock Analysis Report
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