Earnings preview: Macy’s Q1 earnings could be hit by challenging market conditions

Macy’s Inc. (NYSE: M) will kick off the department-store earnings announcements from next week. The retailer is scheduled to report its first quarter 2019 earnings results on Wednesday, May 15, before market open.

Analysts have forecasted earnings of $0.36 per share on revenue of $5.5 billion. The numbers reflect a year-over-year decline of 25% in earnings along with a slight dip in revenue. Macy’s has consistently surpassed earnings estimates for the past four quarters and might do so this time too.

The outlook for the retail industry appears grim as experts have forecasted sales to fall this year. The new tariffs have cast another cloud over this scenario. The impact of this situation on Macy’s is something to watch.

Like its peers, Macy’s has been significantly investing in its business to stay ahead in the competitive landscape. It will be worth noting how these investments have paid off and what effect they have had on costs.

In the fourth quarter, Macy’s beat earnings estimates despite posting a decline in profits. GAAP earnings dropped 46% to $2.37 per share while adjusted EPS fell 4.2% to $2.73 per share. Net sales decreased 2.5% to $8.4 billion. Comparable sales were up 0.4% on an owned basis, and 0.7% on an owned plus licensed basis.

For the full year of 2019, Macy’s has guided for sales growth to be flat and adjusted earnings to come in the range of $3.05-3.25 per share. Comparable sales are anticipated to be flat to up 1% each on owned, and on owned plus licensed basis.

Macy’s launched a restructuring program last year to improve productivity and profitability and the company expects the restructuring actions to generate annual expense savings of $100 million beginning in 2019.

Macy’s stock has dropped 25.3% thus far this year. Looking at the past one year, the stock has fallen 25.5%. The majority of analysts have rated the stock as Hold.

Macy’s competitors Kohl’s Corp. (NYSE: KSS) and J.C. Penney Company (NYSE: JCP) will report earnings on May 21 while another rival Target Corp. (NYSE: TGT) is scheduled to report earnings on May 22.

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