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Macy's (M) Strategic Endeavors on Track, Up 18% in 6 Months

Macy's, Inc. M has been making smart moves to enrich the customer experience. Management has undertaken initiatives to gain market share, better engage with customers and maintain a decent financial profile. The company is ramping up digital capabilities to provide better digital experiences and its Polaris strategy also holds promise.

Markedly, shares of this key omnichannel retailer have jumped 18.3% over the past six months, outperforming the industry’s 9.3% gain. Additionally, analysts look optimistic about the company’s potential. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) currently stands at $24.3 billion and $3.89, respectively. These estimates show year-over-year growth of 0.4% and 2.4%, respectively.

Let’s Delve Deeper

Macy’s is on track to strengthen its omnichannel capabilities with investments in online shopping experiences, data and analytics, technology infrastructure as well as better fulfillment capabilities. The company expanded its omnichannel offerings such as curbside, store pickup and same-day delivery which bode well.

During the fourth quarter of fiscal 2022, approximately 68% of digital sales came from mobile devices. Stores fulfilled 33% of digital sales in the quarter. Digital penetration was 37%, 40% and 23%, respectively, at Macy’s, Bloomingdale’s and Bluemercury brands during the quarter under discussion. Digital sales are likely to be roughly 32-34% of net sales for fiscal 2023.

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Macy’s collaboration with the Swedish buy now, pay later group Klarna, is enabling the company to offer shoppers financial ease and payment flexibility with their online purchases. Here, shoppers can choose to pay in four equal and interest-free installments at the online checkout.

The company’s tie-up with DoorDash for expediting delivery services is also encouraging. Markedly, a redesigned mobile app, live shopping functionality and addition of payment options such as Apple Pay, Klarna Express Checkout, PayPal and Venmo have been making shopping easier for customers.

Macy’s has also launched a digital marketplace, featuring a collection of new brands, products and categories from third-party sellers. Also, Market by Macy's initiative plays an important role in the company’s omnichannel market ecosystem. To power the platform, Macy’s has partnered with Mirakl — a leading enterprise marketplace technology company.

Selected third-party merchants will sell products on macys.com and bloomingdales.com. In fiscal 2022, Macy’s had launched Own Your Style, an omnichannel brand platform, which allows customers to celebrate their personal style.  The company is also focused on off-mall smaller format stores, which play an important role in boosting the omnichannel ecosystem.

In fiscal 2023, management intends to open four Market by Macy’s and one Bloomie’s. Management said that if these locations will outperform, then it will incrementally accelerate off-mall openings starting fiscal 2024. It intends to add 2,000 brands to Macy’s marketplace this year and launch Bloomingdale’s marketplace in the back half.

In addition, Macy's Polaris Strategy to adapt better to the evolving retail ecosystem bodes well. This strategy includes strengthening customer relationships, expansion of assortments, accelerating digital growth, optimizing the store portfolio and reducing costs. Moreover, the company’s expanded Star Rewards Loyalty program has been aiding better customer engagement.

Wrapping up, the stock is likely to register growth on the bourses given the aforementioned strengths. An expected long-term earnings growth rate of 12% coupled with a VGM Score of A further speaks volumes for this Zacks Rank #3 (Hold) stock.

Key Picks in Retail

We have highlighted three top-ranked stocks, namely Abercrombie & Fitch ANF, American Eagle Outfitters AEO and Boot Barn BOOT.

Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 1.6% and 33.1%, respectively, from the year-ago reported figures. ANF delivered a negative earnings surprise of 141.3% in the last reported quarter.

American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23.3% in the last reported quarter.

The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 3.4% and 3.2%, respectively, from the year-ago reported figures.

Boot Barn, a fashion retailer of apparel and accessories, currently carries a Zacks Rank of 2. The company has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 8.2% and 9.1%, respectively, from the year-ago reported figures.

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Macy's, Inc. (M) : Free Stock Analysis Report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

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