Macy's (NYSE: M), like a lot of physical retail, has been out for recovery in the midst of a reopening economy. Shares spiked 6% briefly before pulling back in moderate trading today. The gains, coupled with the latest news out of the company, suggests that Macy's may not have seen the top of its own recovery just yet.
Macy's Stock News Turns Positive as Analysts Improve Position
On the surface, the news is not all that great for Macy's. The latest word featured Jefferies Financial Group issuing projections, via analyst S. Wissink, that the company will turn in a loss of $0.40 for the quarter. That's an improvement over earlier projections, which called for a loss of $0.49, but a loss is a loss nonetheless.
However, where things improve for Macy's is the projections issued for upcoming fiscal years. Jefferies issued projections going into Fiscal Year 2023, and while the individual quarters call for losses, the ultimate figures for the fiscal years should prove profitable. Jefferies expects a profit of $0.80 per share for the 2022 fiscal year, and a profit of $1.16 for 2023.
Similar sentiment was found from S&P Global Ratings, which hiked Macy's outlook to positive. S&P Global Ratings cited an improving overall economy, as well as better conditions for clothing retailers in general. A rising tide is poised to lift all boats, S&P Global Ratings figures, but Macy's market is also likely to gain as a result.
Do Analysts Expect Macy's to Continue Recovery?
The news is good out of Jefferies, and out of S&P Global Ratings, but are they alone in the field? Our latest research suggests that's not so. There's already a comeback of sorts beginning for Macy's, and it's coming from financial analysts.
A year ago, the company had one “buy” rating, along with four “hold” and nine “sell.” Today, that's improved to two “buy” ratings, two “hold” and seven “sell.” Sell-side analysts are departing altogether, while the more bullish analysis is appearing in its place.
Price targets have been on the rise from analysts for much of the year so far. While only six analysts have offered positions so far this year, five of them have increased their price targets on Macy's. However, of those five, all five are below Macy's current share price of $17.24 per share. That suggests growth may be a bit limited, and Macy's could be near a top.
Is There Still Room for Growth in Macy's Share Price?
While the broader analyst perspective suggests that Macy's is at a top, there are developments that suggest there may still be room for growth. Yes, Macy's is closing stores in many places, but it's also expanding its position with others.
Recently, Ohio's Summit Mall landed a Macy's Backstage, which is contained in one side of the current Macy's second floor. Macy's Backstage focuses on deeply discounted items. Everything from Nike (NYSE:NKE) shoes to scented candles shows up therein, and that means a new market opportunity for Macy's, one that's likely repeatable at surviving Macy's locations all over. Macy's is also targeting new markets via new brands, including the line of plus-size clothing from E! News host Nina Parker.
There's also a clear demand for physical retail and department stores; a recent AlixPartners survey noted that “department stores” were actually the overwhelming choice for shoe shopping during the Covid pandemic, with 37% turning to a department store's website. Slightly less than that, 33%, have gone to the store itself. Macy's actually proved to be the number one answer in the study when it came to specific stores for “non-athletic footwear.”
Granted, the recent shift away from nonathletic wear, in general, is likely to hinder Macy's. We know that people have been increasingly turning to “athleisure” brands like Under Armour (NYSE: UAA) for clothes best worn around the house. Since “around the house” is pretty much everybody's life these days, that left Macy's somewhat in the cold. However, with stores and businesses reopening, and more opportunities to wear “nonathletic footwear”, that bodes well for Macy's
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