Macy's, Inc. (Macy's) is tentatively scheduled to report Q3-2010 results on Wednesday, November 10, 2010. In the last three quarters ending July 2010 quarter, the company's reported EPS exceeded analysts' consensus estimates by margins in the range of 2.49% and 23.24%.
Macy's is a retail organization operating retail stores and Internet Websites under two brands (Macy's and Bloomingdale's) that sell a range of merchandise, including men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods in 45 states, the District of Columbia, Guam and Puerto Rico. As of January 30, 2010, the company's operations were conducted through four retail operating divisions: Macy's, macys.com, Bloomingdale's and bloomingdales.com.
The company reported earnings of $0.35 per diluted share for the second quarter of 2010, ended July 31, 2010. This significant earnings increase over the second quarter of last year was driven by higher-than-expected sales, improved margins, a reduced expense rate and disciplined inventory management. Sales in the second quarter totaled $5.537 billion, up 7.2% from total sales of $5.164 billion in the second quarter of 2009. On a same-store basis, Macy's, Inc.'s second quarter sales were up 4.9%. Operating income totaled $370 million or 6.7% of sales for the quarter ended July 31, 2010, compared with operating income of $248 million or 4.8% of sales for the same period last year. Second quarter 2009 operating income included $34 million in restructuring-related costs. Excluding these costs, operating income for the second quarter of 2009 was $282 million or 5.5% of sales. The company opened no new stores in the first half of 2010.
Analysts' estimates for the third quarter 2010 range from a low of ($0.07) to a high of $0.07, compared to a consensus estimate of $0.036 or year ago eps of ($0.03). Analysts' revenue estimates for the third quarter 2010 range from a low of $5.44 billion to a high of $5.61 billion, compared to a consensus estimate of $5.55 billion or reported revenue of $5.28 billion in the same quarter a year ago. For the third quarter, the consensus EPS forecast has increased over the past week from $0.035 to $0.036 (2.86%) and increased over the past month from $0.029 to $0.036 (24.14%). Of the 15 analysts making quarterly forecasts, 5 raised and none lowered their forecast.
Upward revision in analysts' consensus estimate is attributable to the company's revised up guidance. Macy's, Inc. currently expects same-store sales in the second half of fiscal 2010 to be up in the range of 3% to 3.5%, which would result in full-year 2010 same-store sales to be up between 4% and 4.2%. At the beginning of the year, the company's initial guidance was for a 2010 same-store sales increase of 1% to 2%. At the end of the first quarter, full-year same-store sales guidance was raised to up 3% to 3.5%, reflecting improvement in the business trend.
Based on stronger sales expectations, Macy's, Inc. increased its full-year 2010 earnings guidance to $1.85 to $1.90 per diluted share. This compares with previous guidance of $1.75 to $1.80 per diluted share, and initial earnings guidance of $1.55 to $1.60 per diluted share provided at the beginning of the year.
Looking at the same store sales growth in Q3, I think the company is likely to marginally exceed analysts' consensus estimate for Q3.
The stock closed Tuesday at $24.02, compared to 52 week range of $15.34 and $25.26. YTD, the closing share price is up by $6.8 or 39.49%. I forecast 2010 earnings per share at $1.9, and see 2011's at $2. Based on these estimates, I set a target price of $26.5.
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