EU and US could reach trade deal this weekend - Reuters
On Thursday, JPMorgan analysts downgraded Macy’s (NYSE:M) stock from Overweight to Neutral, adjusting the price target downward to $14.00 from the previous $19.00. The revision followed Macy’s fourth-quarter financial results, which, while beating the Street’s adjusted earnings per share (EPS) expectations, showed mixed performance in other areas. According to InvestingPro data, Macy’s stock is currently trading near its 52-week low of $13.12, with a notable year-to-date decline of 21.4%. The stock’s high volatility is reflected in its beta of 2.11, significantly higher than the market average.
Macy’s reported an adjusted EPS of $1.80 for the fourth quarter of 2024, surpassing the anticipated $1.54. This beat was attributed to several factors, including higher-than-expected Other Revenues, which include Credit Income and Macy’s Media Network, totaling $239 million against the $213 million expected. Additionally, the company’s gross margins reached 35.7%, slightly above the Street’s forecast of 35.5%, and Selling, General & Administrative (SG&A) expenses decreased by 1.0% year-over-year, compared to the expected increase of 0.7%.
Despite these positives, Macy’s same-store sales for owned, licensed, and marketplace channels only saw a marginal increase of 0.2%, which was below the anticipated 0.6%. Moreover, Macy’s provided guidance for the fiscal year 2025, projecting an EPS range of $2.05 to $2.25, which falls short of the Street’s expectation of $2.26. The company also expects same-store sales to decline between 0.5% and 2.0%, which is less optimistic than the Street’s forecast of a 0.8% increase. InvestingPro analysis shows that despite challenges, Macy’s maintains a strong dividend tradition with 23 consecutive years of payments and a current yield of 5.2%, making it an interesting option for income-focused investors.
For the first quarter of the fiscal year 2025, Macy’s anticipates an EPS between $0.12 and $0.15, with same-store sales projected to decrease by 4.5% to 2.5%, a stark contrast to the Street’s prediction of a 0.6% increase.
JPMorgan’s analysis points to an EBITDA margin profile for Macy’s in the fiscal year 2026 that is approximately 200 basis points below the company’s pre-pandemic baseline, based on a core EBIT dollar base of $5 million. This is in comparison to the $587 million core EBIT margin from 2017 to 2019. The downgrade reflects concerns over the retailer’s performance and future earnings potential relative to past benchmarks. InvestingPro’s Fair Value analysis suggests Macy’s is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides detailed analysis of the company’s financial health, valuation metrics, and growth prospects.
In other recent news, Macy’s reported its fourth-quarter earnings for 2025, with earnings per share (EPS) of $1.80, surpassing expectations but slightly missing revenue forecasts at $7.77 billion. This EPS figure was notably higher than the anticipated $1.54, showing Macy’s ability to exceed earnings expectations despite revenue coming in just shy of the forecasted $7.78 billion. CFRA analyst Zachary Warring adjusted Macy’s stock price target to $13 from $15, maintaining a Hold rating due to anticipated long-term challenges in the department store sector. Meanwhile, Citi analyst Paul Lejuez kept a Neutral rating on the stock with a $16 price target, acknowledging the EPS beat but noting that the company’s fiscal year 2025 forecast fell short of consensus estimates.
Macy’s has forecasted a decline in comparable store sales of 2.5% to 4.5% for the first quarter, influenced by weather disruptions and fluctuating consumer confidence. The company is entering the year with slightly elevated inventories, up by 2.5%, but management asserts that the inventory mix is fresher compared to the previous year. Macy’s management remains cautious, reflecting broader retail sector challenges, and has projected a full-year comparable sales decline of 1.25% at the midpoint, with EPS expected between $2.05 and $2.25. Despite the challenges, Macy’s has demonstrated effective expense management and improved delivery speeds, closing 64 underperforming stores to optimize its operations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.