Macy’s (NYSE:M)
On Tuesday, August 23, before the opening of the markets, Macy’s (NYSE:M) announced its financial results for the second quarter of fiscal 2022. The market took notice of the numbers, sending shares up by 5 percent on the day they were released.
Macy’s (NYSE:M) has benefited from a general lack of available goods following the pandemic outbreak. For that reason, it could charge greater rates for its wares, as there was less competition in the market. Many stores have overinvested in inventory; thus, the tendency is reversing.
The second quarter numbers for Macy’s (NYSE:M) have the stock market talking, so let’s take a look.
EPS Estimates for 2022 Have Been Reduced by Macy’s.
In particular, Macy’s (NYSE:M) comparable store sales fell 1.5% in the quarter ending July 30. This figure excludes the effect of store expansions and closings. The decline from last year comes after a challenging contrast to the previous year when sales rose as the economic rebound drove people back to retailers. In addition, consumer trends have shifted again.
The rising cost of living is reflected in higher prices for food, gas, and lodging as a direct result of inflation. That means less money for fun stuff like buying clothes. This marked a drastic change from the several previous quarters, during which merchants griped about not having enough inventory to meet consumers’ ravenous appetites. To solve this problem, stores like Macy’s rushed to buy more products their customers desired to see on store shelves.
Shipping delays and production bottlenecks both wreaked havoc on supply systems. Shipments might be delayed by weeks if an outbreak occurred at a key harbor. The result was an earlier-than-usual rush of orders by retailers for merchandise. There is a higher chance that client demand would shift away from the sought products due to the longer lead time.
As of July 30, Macy’s had $4.6 billion in stock. Compared to the same period a year before, this was an increase of $1.6 billion. Since consumer behavior is changing rapidly, investors are keeping a closer eye on this indicator. Macy’s potential loss is that it will be forced to keep stock of things nobody wants to buy. Macy’s has already begun lowering prices and expanding promotions on select unwanted items to get ahead of the problem.
In the weeks leading up to the price cuts, both Target (NYSE:TGT) and Walmart (NYSE:WMT) indicated they, too, would be offering discounts on popular products during the early stages of the pandemic but have now lost their appeal. All around, the price cuts are bad for business.
As said, Macy’s (NYSE:M) most recent quarter had a decline in the gross profit margin of 170 basis points. Because of this, management has reduced profit projections for the remainder of the fiscal year 2022.
On August 23, Macy’s (NYSE:M) increased their earnings per share forecast for 2022 to $4.00 and $4.20. That was significantly lower than the $4.53–$4.95 forecasted on May 26.
Actually, It’s Not That Horrible
What gives with the 5% increase in Macy’s (NYSE:M) stock price on the day of the release, despite the negative news? Foreseeably because its quarter ended up being better than expected. Market participants were aware of the deteriorating conditions for retailers after analyzing the results from Walmart, Target, and others. A sigh of relief was heard from investors when the less severe impact on Macy’s was realized.
Featured Image: Megapixl @Wolterk
Author Shariq Khan 
