Macy’s Just Got an Upgrade from Goldman Sachs

Department store chain Macy’s Inc. has received an upgrade from investment banking firm Goldman Sachs this week.
According to Goldman’s previous remarks, Macy’s turn around plans were “insufficient,” which makes the upgrade promising.

Goldman Sachs analyst Alexandra Walvis has upgrade the stock from “sell” to “neutral” and cited that Macy’s first-quarter results showed a more balanced risk/reward in the wake of significant share underperformance.

It was last September that Goldman had downgraded the stock to “sell” and shares had fallen 41%.

“M has also pursued a more aggressive roll-out of new initiatives to drive traffic and customer acquisition, which, while encouraging, have come with a step-up in necessary investments,” Walvis wrote. “While we continue to believe M will see fading fundamentals in the medium term as secular challenges weigh, we see near term risk/reward as less skewed to the downside following underperformance.”

It was this week that Macy’s reported first quarter financial results and beat expectations.

On a reported basis, net income fell 2% to $136 million, or $0.44 per share, compared to the year-ago quarter. Adjusted net income fell 8% year-over-year to $137 million, or $0.44 per share.

Asset sale gains totaled $43 million pre-tax, or $31 million after-tax and $0.10 per share. This compares to asset sale gains of $24 million pre-tax, or $18 million after-tax and $0.06 per share in the prior-year quarter.

Looking ahead the company expects net sales to be approx. flat compared with last year. Comparable sales are expected to be flat to up 1%, both on an owned basis, and on an owned plus licensed basis. Adjusted EPS is forecast in the range of 3.05 to $3.25.

This was the sixth straight quarter of an increase in comparable sales for the retailer.

“Our brick & mortar sales trend improved sequentially in the first quarter, supported by the Growth50 stores and Backstage. We had another quarter of double-digit growth in our digital business, and mobile continues to be our fastest-growing channel,” said Jeff Gennette, Macy’s, Inc. Chairman and Chief Executive Officer.

Macy’s operates about 890 stores under the nameplates Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s Outlet, Bluemercury and Story primarily in the United States.

Disclaimer: We have no position in Macy’s Inc. (NYSE: M) and have not been compensated for this article.