Macy's Inc. – Value |
The department store is very much alive. Macy's, Inc. (M) just raised second quarter and full year sales guidance following a much stronger than expected June. This Zacks #1 Rank (strong buy) is still a value stock even as shares trade at new 52-week highs.
Macy's operates 850 department stores under the brands Macy's and Bloomingdale's in 45 states, the District of Columbia, Guam and Puerto Rico.
It also is an online retailer using the websites macys.com and bloomingdales.com.
Sales Jumped 7.5% in June
On July 7, Macy's released its June sales figures and saw same-store sales jump 6.7% which was much higher than the consensus of retail analysts of 5.1%.
Total sales rose 7.5% to $2.2 billion.
The growth was spread across the company in both stores and in both online sites. Online sales were especially hot, climbing 45% in June. They're up 39.6% for the year.
However, the online sales are included in the overall sales numbers and not otherwise broken out so it's hard to gauge how much of an impact this increase really had on overall sales.
Raised Sales Guidance
Given the hot June numbers, Macy's raised its second quarter sales guidance to an increase of 6% compared to its prior guidance of 5%.
Since it is raising its second quarter forecast, it also raised its full year guidance to an increase of about 48.%, up from the recent guidance of 4.5%.
The company is expecting July's sales results to be lower than either May or June because July was strong a year ago so year over year comparisons won't be as favorable.
Second Quarter Estimates Already Climbing
Given the June sales results and raised guidance, analysts moved to raise second quarter estimates.
Since the report, the second quarter Zacks Consensus Estimate jumped by 2 cents to 46 cents per share.
So far, full year estimates remain unchanged in the prior 7 days. But over the last 2 months, the 2011 Zacks Consensus Estimate increased to $2.50 from $2.32 per share.
This is earnings growth of 18.3%.
All The Components of a Value Stock
Shares have steadily moved higher in the last 2 years as the economy improved. But even though they're at 2 year highs, they still have value.
Macy's has a forward P/E of just 12.2, which is well under the S&P 500 average of 14.1. It is also cheaper than its peers such as Nordstrom, Inc. (JWN) which has a forward P/E of 16.8.
The company's price-to-book ratio of 2.3 is also under the 3.0 level I use as the parameters for a "value" stock. This is also below Nordstrom's price-to-book which is 5.2.
The price-to-sales ratio also indicates "value." At 0.5, it is under 1.0. A P/S ratio under 1.0 usually indicates a company is undervalued. By comparison, Nordstrom has a P/S ratio over 1.0- of 1.1.
Macy's shares are an intriguing combination of value plus earnings growth. Stay tuned on Aug 10 for scheduled second quarter results.
About the author: Zacks Investment Research
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