“Death of storefront retail” predictions have proven elusive as shoppers have swarmed malls during the economic reopening and hard-on-their-luck retailers have made moves to survive — and even thrive, notes Mike Cintolo, editor of Cabot Top Ten Trader.
Far from killing fashion retailers, the pandemic has resulted in shoppers wanting to inspect firsthand the latest clothing trends at store locations before buying.
Curbside pickup and from-store shipments have also increased, giving stores added value. Macy’s is seeing a tailwind from this phenomenon, as the lifting of virus restrictions — including a return to work and schools — has resulted in higher at-store shopping volumes.
Macy’s has also embraced a store-within-a-store strategy, just announcing a partnership with Toys’R’Us; Macy’s will host the toy retailer in more than 400 stores in 2022 as part of its focus on the under-40 demographic. And like many traditional retailers, Macy’s is now focused more on digital sales as part of its inventory and expense reduction initiatives.
All of this is paying off in a surprisingly big way: Macy’s obliterated estimates in Q2, delivering a 59% revenue increase (off a low pandemic comparison) and per-share earnings of $1.29, compared to expectations of 23 cents
Macy’s also posted a comp-store sales increase of 6% (compared to the year-ago 10% decrease), while digital sales improved an eye-opening 45% from the last quarter and up 32% from a year ago.
Macy’s advertising outreach has also paid dividends, as shown by the five million new customers it attracted in Q2 (up 30% from 2019!. Also contributing to the strength was Macy’s reinstatement of a dividend (yield 2.8%), along with a $500 million share buyback authorization.
Going forward, management guided for Q3 revenue to be $5.1 billion (up 28%), while Wall Street sees earnings of nearly $4 per share this year.
Technically, after lifting off from 6 last November (when enthusiasm over an economic reopening started to become widespread), the stock skyrocketed as high as 22 during the meme craze in January, which effectively began a multi-month consolidation.
The stock didn’t get hit too badly, finding support repeated in the 16 area, and after shaping up in August it blasted off on earnings a few weeks back before a reasonable dip of late. We think you can start a position here with a stop near the 50-day line.