Macy’s Q4: Investors Rejoice as the Struggling Retailer Shows Turnaround Potential

Shares for Macy’s Inc. are enjoying a solid surge today — up more than 6 percent 10:45 a.m. ET — after the firm reported better-than-expected fourth-quarter comparable sales growth and offered a bullish outlook for the year ahead.

After struggling to eke out comp growth for several quarters, the beleaguered department store chain said today that its comparable sales on an owned basis were up 1.3 percent during the period — and 1.4 percent on an owned-plus-licensed basis. Those numbers blew past market forecasts for a meager comp gain of 0.3 percent.

Macy’s said its sales in the fourth quarter gained 1.8 percent to $8.7 billion, which was in line with analysts’ forecasts.

The company’s reported profits more than doubled year over year to $1.3 billion, or $4.31 per diluted share. On an adjusted basis, earnings per diluted share were $2.82, handily topping market watchers’ estimates for diluted EPS of $2.71.

Macy’s chairman and CEO Jeff Gennette cited the firm’s preparedness for the 2017 holiday season as well as ongoing efforts — including its newly revamped loyalty program — as key factors that bolstered business during the fourth quarter.

“We are committed to returning Macy’s to comparable sales growth in 2018 and will build on the momentum we created in the fourth quarter of 2017,” he added. “We are encouraged to see a trend improvement in our brick-and-mortar business, and we had the 34th consecutive quarter of double-digit growth in our digital business … We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”

For the full year, Macy’s sales fell 3.7 percent to $24.8 billion. Comparable sales on an owned basis declined 2.2 percent. On an owned-plus-licensed basis, comps declined 1.9 percent. Earnings per diluted share were $5.04, compared with $1.99 per share in the previous year.

“In 2017, we tested and iterated a number of merchandising and strategic initiatives as part of our North Star Strategy. These initiatives contributed to our fourth-quarter performance, and in 2018, we are ready to scale as well as test additional revenue-driving initiatives,” Gennette said. “We are also encouraged by customer response to our new Star Rewards loyalty program. On the path to growth in 2018, we will continue to improve our execution, strengthen our product offerings and make the necessary investments to be competitive with today’s demanding consumer.”

In the year ahead, Macy’s expects comparable sales on both an owned and an owned-plus-licensed basis to be flat to up 1 percent. Total sales are expected to be down between 0.5 percent and 2 percent. Adjusted diluted EPS is forecast in the range of $3.55 to $3.75.

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