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On Thursday, CFRA analyst Zachary Warring revised the price target for Macy’s (NYSE:M) shares, lowering it from $15.00 to $13.00, while maintaining a Hold rating on the stock. Currently trading at $13.22, Macy’s stock shows significant volatility with a beta of 2.11 and is trading near its 52-week low. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics. Warring’s reassessment comes in light of anticipated long-term challenges for the large department store sector, which is expected to see stagnant sales growth. The new price target is based on a forward P/E multiple of 6.0x, derived from CFRA’s fiscal year 2026 (ending January) earnings per share (EPS) estimate, and sits between Macy’s three- and five-year average forward P/E multiples.
The firm has also reduced its fiscal year 2026 EPS estimate for Macy’s by $0.30, setting it at $2.20, and has introduced an estimate of $2.10 for fiscal year 2027. With a market capitalization of $3.7 billion and an attractive dividend yield of 5.22%, Macy’s recently reported normalized earnings for the fourth quarter (Q4) at $1.80 per share, compared to $2.45 in the same period last year. This figure was $0.26 higher than consensus estimates, with revenues reaching $8.0 billion versus the anticipated $8.4 billion, but still $13 million above estimates. InvestingPro data shows the company’s revenue declined by 2.91% over the last twelve months.
Macy’s comparable store sales saw a year-over-year decline of 1.1% in Q4, while its Bluemercury and Bloomingdales brands reported increases of 6.2% and 4.8%, respectively. The company’s Q4 gross margin decreased by 80 basis points year-over-year to 35.7%, impacted by the shift to cost accounting. Looking ahead, Macy’s has forecasted a full-year comparable sales decline of 1.25% at the midpoint and projected EPS to be in the range of $2.05 to $2.25.
The overarching narrative for large department stores remains one of adversity, as they continue to grapple with revenue declines due to changing consumer habits, with more shoppers turning to online and direct-to-consumer channels. CFRA’s neutral stance reflects these ongoing industry challenges. For deeper insights into retail sector trends and comprehensive analysis, including 8 additional ProTips for Macy’s, access the full InvestingPro Research Report, part of our coverage of over 1,400 US stocks.
In other recent news, Macy’s reported its fourth-quarter earnings for 2025, surpassing earnings per share (EPS) expectations with an EPS of $1.80, which exceeded the forecasted $1.54. However, revenue slightly missed expectations, totaling $7.77 billion against a forecast of $7.78 billion. The company’s performance was marked by a notable increase in free cash flow, which rose by 71% year-over-year to $679 million. Despite this, the company has expressed caution for fiscal year 2025, with net sales guidance ranging from $21.0 to $21.4 billion and adjusted EPS expected between $2.05 and $2.25.
Macy’s management anticipates a decline in comparable store sales between 2.5% and 4.5% for the first quarter, influenced by weather disruptions and fluctuating consumer confidence. The retailer is facing challenges with slightly elevated inventories, up by 2.5%, although the inventory mix is fresher compared to the previous year. Citi analyst Paul Lejuez maintained a Neutral rating on Macy’s stock, noting that while the fourth-quarter EPS exceeded expectations, the company’s fiscal year 2025 forecast falls short of consensus estimates. Macy’s closed 64 underperforming stores and improved delivery speeds, but anticipates challenging market conditions due to economic pressures. These recent developments underscore the cautious approach Macy’s is taking amid broader retail sector challenges.
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