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Macy’s (M) Q1 Earnings: Omnichannel & Cost Control Hold Key


Macy's, Inc. M is slated to report first-quarter fiscal 2018 results on May 16, before the opening bell. In the previous quarter, this department store retailer delivered a positive earnings surprise of 4.8%. The company’s bottom-line has also surpassed the Zacks Consensus Estimate in the trailing three out of four quarters.

How Are Estimates Faring?

After registering a bottom-line increase of 39.6% in the final quarter of fiscal 2017, Macy's is likely to record year-over-year growth of 66.7% in the first quarter of fiscal 2018 as well. The Zacks Consensus Estimate for the quarter under review is pegged at 40 cents compared with 24 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has increased by 4 cents in the last seven days. Analysts polled by Zacks now project revenues of $5,430 million, reflecting year-over-year increase of roughly 1.7%. In the last reported quarter, the company registered top-line growth of 1.8%.

Factors at Play

Macy’s strategic investments across stores, technology and merchandising are likely to cushion comparable sales. The company has also announced slew of measures revolving around store closures, cost containment, real estate strategy and investment in omnichannel capabilities to improve performance. Moreover, we believe that focus on private label brands will help augment margins.

Management is developing e-commerce business, Macy’s Backstage off-price business along with expanding Bluemercury and online order fulfillment centers. The company has added a new feature to its mobile app called Mobile Checkout, which allows customers to scan bar codes of items and pay via smartphones.

These initiatives are seen as part of the company’s endeavor to better withstand competitive pressure from both brick-and-mortar discount stores and online retailers, such as Amazon (AMZN). Although comparable sales did increase in the last reported quarter, analysts still remain concerned about the performance of the same.

Macy's, Inc. Price, Consensus and EPS Surprise

Macy's, Inc. Price, Consensus and EPS Surprise | Macy's, Inc. Quote

What the Zacks Model Unveils

Our proven model shows that Macy’s is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Macy’s has a Zacks Rank #3 and an Earnings ESP of +4.50%. This makes us reasonably confident of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Best Buy BBY has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target TGT has an Earnings ESP of +0.32% and a Zacks Rank #3.

Kroger KR has an Earnings ESP of +4.99% and a Zacks Rank #3.

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