Earnings Preview: Will Macy’s continue its mojo?

After reporting strong comp-store sales growth in the past two quarters, Macy’s (M) is scheduled to report its second-quarter earnings on August 15th before the opening bell. Backed by the stellar results over the past six months, the company’s stock has been having a dream run in the bourses, jumping nearly 60% in 2018 and surged more than 95% in the last 12 months.

Investors will be keeping a tab on the sales growth reported by the department store chain, and most importantly, whether it’s able to top analyst estimates would be the critical question. Analysts expect Macy’s to report earnings of $0.50 per share, which is an increase of $0.02 compared to last year.

Last quarter, the retailer reported stellar first-quarter results topping street estimates on both the top and bottom line. Sales improved 3.6% touching $5.54 billion, while earnings jumped to $0.48 per share compared to $0.26 per share reported in the first quarter last year.

The company attributed strong numbers in the first quarter to the strong performance from all of its brands across the globe. Besides, the company also benefitted from better management of inventories while keeping a check on the expenses.

Related: Macy’s first quarter results

Comp-store sales growth of 4.2% reported in the first quarter was aided by 250 basis point benefit from friends and family event shifted to the first quarter, which usually is a second-quarter event. The company expects this event shift would impact second-quarter comp sales growth to the tune of 240 basis points.

Macy’s has been focusing on the multi-pronged strategy to sustain growth while keeping competition in check. It has been pushing the envelope on the omnichannel strategy investing heavily in its digital initiatives. The retail giant’s e-commerce business saw double-digit growth in the first quarter, which is expected to bear fruit for the firm in the second quarter. As part of the digital initiatives, the company has been beefing up its mobile app with new features, which takes the friction out for consumers to have a seamless shopping experience across all channels.

Another important aspect which analysts would be expecting an update from the management would be on the monetization of its real estate assets. It would be interesting to see how the company would unlock value from its flagship stores in Manhattan and San Francisco which are high-end prime properties.

With increased consumer spending and unemployment levels at record low levels, retail sales are expected to witness robust growth. However, headwinds like increasing inflation due to the ongoing trade wars and soft wage growth would make a dent in the growth. Based on the sales outlook provided for the year, one can gauge the consumer spending forecast for the latter half of the year, which includes the Christmas holiday season.

Macy’s is facing increased competition from its brick-and-mortar peers, and when it comes to the digital front, the company competes with Amazon (AMZN) and other rivals. The retail chain’s share has increased by 35% since the first quarter results backed by the upbeat results. Will Macy’s continue its report stellar results in the second quarter? Stay tuned!