Macy’s Delivers Stellar Q3 Results; Shares Up 21.2%

Shares of premier omnichannel retailer Macy’s, Inc. (M) delivered stellar third-quarter results, with both earnings and sales exceeding estimates by a huge margin. The company also increased its full-year fiscal 2021 outlook expecting a strong upcoming holiday season.Despite the ongoing supply chain disruptions and labor challenges, Macy’s managed to outperform expectations with a disciplined approach on the heels of a recovering economy.

Following the news, shares jumped 21.2%, reaching an all-time high of $37.95 before closing at $37.37 on November 18.

Stellar Results  

The company reported adjusted earnings of $1.23 per share, significantly higher than analysts’ estimates of $0.31 per share. In the year-ago period, Macy’s posted an adjusted loss of $0.19 per share.

Furthermore, net sales rose 36.3% year-over-year to $5.44 billion, surpassing analysts’ estimates of $5.2 billion. Similarly, comparable sales on an owned-plus-licensed basis grew 35.6% compared to Q3FY20. Additionally, Macy’s added 4.4 million new customers in the quarter.

Management Comments

Jeff Gennette, chairman and CEO of Macy’s, said, “The results were driven by the effective execution of the Polaris strategy and an improved economic environment… Consumers continue to spend, and we successfully offered a wide range of expanding merchandise assortment to meet their growing demand.”

Gennette added, “Looking ahead to the fourth quarter, we remain a special place for holiday shopping, and our robust omnichannel ecosystem is showing resilience in the face of labor and supply chain challenges and enables us to meet customer shopping needs with speed and convenience.”

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Updated Guidance

Based on the strong business momentum and economic recovery, Macy’s increased its full-year fiscal 2021 guidance. The company expects Q4 comparable sales on an owned and licensed basis to grow by 2% to 4% over 2019 levels.

For FY21, the company forecasts net sales to be between $24.12 billion and $24.28 billion against the consensus estimate of $23.78 billion.

Additionally, FY21 adjusted earnings are now projected to fall in the range of $4.57 per share to $4.76 per share against the consensus estimate of $3.89 per share.

The company also announced the launch of a curated digital marketplace platform to attract more customers, and improve sales growth across all channels.

Analysts’ Take

Impressed with Macy’s strong results, analyst Charles Grom of Gordon Haskett Capital Corporation lifted the price target on the stock to $50 (33.8% upside potential) from $37, and maintained a Buy rating.

Grom is encouraged by the company’s planned launch of a curated marketplace and new ways of unlocking value for the firm. The analyst believes Macy’s is well-positioned for stronger growth in 2022 with its successful 2021 campaign.

Overall, the stock has a Hold consensus rating based on 3 Buys, 4 Holds, and 4 Sells. The average Macy’s price target of $27.27 implies 27% downside potential to current levels. However, shares have exploded 307% over the past year.

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