Chain Store Macy’s Issue Gloomy Q1 Outlook

Chain Store Macy’s Issue Gloomy Q1 Outlook
May 22, 2020


Apparel and accessories chain Macy’s Inc (NYSE: M) stated that it anticipates a 45% decline in the first-quarter sales and the net losses could be more than $1 billion, primarily due to the Covid-19 pandemic. The company also announced that it does not anticipate reporting 1Q 2021 earnings until July 1st due to interruptions caused by the pandemic. The company’s stores were temporarily shut on March 18th, and are now being reopened. At some of Macy’s stores, off the sidewalk pick up is offered. Despite the gloomy outlook, the stock gained 5.92% to close at $5.37.

The Cincinnati- Ohio based retailer of cosmetics, home furnishings, and other consumer goods stated that it anticipates reporting an operating loss in the range of between $905 million and $1.11 billion, compared with net income of $203 million in the prior-year period. The company is also predicting Q1 sales in the range of $3 billion to $3.03 billion, down from $5.50 billion in the prior-year period.

The company’s CEO, Jeff Gennette, is optimistic about a steady recovery. Gennette said, “We expect business to recover gradually.”

While presenting its Q1 forecast, the retailer also stated that it anticipates having “sufficient liquidity” to work on its 2020 priorities.

Despite the optimism, the company acknowledges that the worst is yet to come. Macy’s expects second-quarter profits to be under more pressure than the first quarter. The company intends to market its merchandize aggressively.

In a note to clients, GlobalData Retail Managing Director Neil Saunders explained why Macy’s could be worst affected in the prevailing scenario. Saunders note reads as follows: “The scale of the deterioration underlines the fact that Macy’s has a very high-cost base that, even with furloughs, simply drains the business when trade declines.”

According to Saunders, “Macy’s struggles to maintain sales levels because much of what it sells is just not that compelling.”

Currently, 190 of Macy’s namesake department stores and Bloomingdale’s shops have opened fully. Another 80 of its shops are planned to be opened for the Memorial Day holiday this weekend. By late June, the company hopes to have almost all of its shops open.

Gennette issued an optimistic view of the demand scenario: “With two weeks of results from reopened stores, customer demand is moderately higher than we anticipated.”

Gennette revealed that online sales had been steadily increasing in April, but will only “partially offset the loss of sales from the stores.” The company stated that home goods, activewear, and kids’ apparel are seeing high demand online.

In the meanwhile, the company is making arrangements to raise funds in order to manage the crisis effectively.

The company’s CEO revealed that it is already working out with bankers and is confident of receiving necessary financing at the earliest. “We notified our banking partners early on of our plans to access additional financing, and this process is on track. We are confident we will obtain this financing before it is needed, allowing us to improve our financial flexibility.”

Macy’s expects to end Q1 with $1.52 billion cash on hand, up from $737 million a year ago. It anticipates an increase in the total debt to $5.66 billion, compared with $4.72 billion last year. The company has also appointed Felicia Williams, senior vice president, as interim CFO, effective May 31st.

Even before the Covid-19 outbreak, the US chain stores were in trouble because of e-commerce giants such as Amazon. Neiman Marcus, J.C. Penney, and Stage Stores have already filed for bankruptcy protection. Earlier this week, Kohl’s had reported a 44% drop in first-quarter sales. Likewise, Nordstrom, which is scheduled to report earnings in the coming week, has announced the permanent closure of 16 stores.

The gloomy outlook is expected to turn the stock bearish in the short-term.

The historical price chart indicates that the stock has broken below its 50-day moving average. Additionally, the MACD indicator has a negative reading. The sharp fall indicates the huge selling pressure on the stock. Therefore, we are anticipating the stock to move down in the short-term.

macy - technical analysis - 22nd May 2020

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Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins

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