Macy’s (NYSE:M) Reports Another Nice Beat, Bodes Well For Other Department Store Chains
2:13 pm Tuesday, February 22nd, 2022
Macy’s (NYSE:M) had been up nicely before pulling back after the company reported a strong holiday quarter. The department store giant, which also owns Bloomingdale’s and Bluemercury, blew away analyst expectations with its Q4 (Jan) earnings report this morning and also announced a huge $2 bln share repurchase program. That amount adds to the $500 mln authorization announced over the summer, which has been completed. In addition, Macy’s increased its dividend by 5% to $0.1575/share.
The results were impressive. Adjusted EPS more than tripled yr/yr to $2.45 from a $0.80 a year ago and was well ahead of analyst expectations. The company also exceeded revenue estimates strongly and guided full year EPS and revs well above analyst expectations.
Same store sales were fantastic, increasing +28.3% on an owned basis. The quarter that Macy’s was lapping was from a pre-vaccine period, beset by store and mall closures, but comps were still up +6.6% on a two-year basis. A lack of office commuters and international tourists have been hurting stores in city centers, but suburban stores have been performing well.
Macy’s conceded that it saw an impact from Omicron with its January sales in particular. However, it seems to have navigated that impact well. Looking ahead, Macy’s believes that consumer demand will remain healthy and increase as people return to events and in-person work. Also, international tourism remains a potentially big tailwind, particularly beyond 2022 when travel recovers further.
Macy’s placed bets on categories like fragrances, fine jewelry, home decor, men’s outerwear, toys, sleepwear, and watches, which all performed well in the quarter. Macy’s is known as a good place to shop for gifts, so seasonal holidays provided a tailwind in the quarter.
Overall, Macy’s delivered a good quarter. We think its result, along with Dillard’s (DDS) report, bodes well for other department store and mall-based retailers generally as they report holiday quarter earnings in the next few weeks.
As good as the numbers were, that huge buyback authorization is really helping to propel the stock today. Considering that Macy’s has an $8.3 mln market cap, a $2 bln authorization computes to 24% of shares outstanding. It’s rare to see a percentage that big. We think that a good chunk of that will be spent, given that Macy’s went through its last $500 mln buyback very quickly. The buyback tells us that management feels its stock is not getting the love it deserves from the market, and with its 6.5x P/E multiple at the mid-point of guidance, it’s hard to disagree.
