Wednesday, December 11, 2013

Macy’s - Results Were Good but Not Great

By Sarfaraz A. Khan and Gohar Yousuf 
Earlier this month, the second largest departmental store in the U.S., Macy’s Inc. (NYSE:M) reported its third quarter’s results. The business surprised Wall Street as it managed to surpass analysts’ estimates for both sales and EPS. The market’s expectations were already lower as the company reported disappointing results for the second quarter. Investors were clearly delighted as the company’s shares rose more than 9% on the day of the earnings release. However, the company’s gross margins dropped which indicates that Macy’s has likely reduced prices to drive sales. Due to the lower margins, I believe this was not a high-quality earnings beat.

Earnings Beat

During the quarter, Macy’s reported revenues of $6.28 billion, showing an increase of 3.3% from $6.08 billion in the same quarter last year. Meanwhile, earnings rose 22.1% to $177 million or $0.47 per share. On the other hand, according to data compiled by Thomas Reuters, the markets were expecting earnings of ... read full article at GuruFocus