Macy’s Stock is Getting Discounted Here

Retail department store chain Macy’s NYSE: M stock is becoming more discounted value play with a forward P/E under 9 despite blowing out all expectations in its fiscal Q1 2022 earnings report. The Company has truly transformed itself during the pandemic into a digital retailer as it grew its customer base by 4.6 million new customers with 47% of them coming from its digital channel in Q1 2021. Department stores were an epicenter during the COVID-19 pandemic in 2020, but they are thriving due to the forced digital transformation, e-commerce and omnichannel accommodation. Macy’s is a benefactor of the reopening trade as business rebounds from the pent-up demand. There’s no doubt COVID-19 vaccinations have accelerated re-openings as new forms of access and convenience shape the new normal for consumers. Prudent investors can watch for opportunistic pullbacks to gain exposure in a leader in the consumer retail recovery.

Q1 FY fiscal 2021 Earnings Release

On May 18, 2021, Macy’s released its first-quarter fiscal 2021 results for the quarter ending April 2021. The Company reported earnings-per-share (EPS) of $0.38 excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.47), an $0.85 per share beat. Revenues rose 56% year-over-year (YoY) to $4.71 billion, beating consensus analyst estimates for $4.23 billion.  Comparable same-store-sales (SSS) rose 62.5% YoY. Comparable sales rose 62.5% versus 2020 owned basis and up 63.9% on 2020 owned and license basis. Digital sales rose 34% YoY. The Bronze segment of Stars Reward Loyalty program is the youngest and most diverse loyalty tier saw it add 1.7 million members in the quarter. In total, Macy’s saw a 23% increase in new customers of 4.6 million, compared to Q1 2019. Nearly 47% of these new customers came through its digital channel in Q1 2021. It is worth noting that Q1 2020 included $300 million in inventory write-down from markdowns on fashion merchandise with dramatically lowered metrics due to COVID-19. The Company ended the quarter with $1.8 billion in cash and cash equivalents.

CEO Comments

Macy’s CEO Jeff Genette stated, “In our first quarter we outperformed sales expectations across all three of our brands: Macy’s, Bloomingdale’s, and Blue Mercury. We built on our momentum from the fourth quarter and our sales trend continued to improve throughout the first quarter. These results were driven by the positive effects of the government stimulus program and expanding vaccine rollout, coupled with the accelerated execution of our Polaris strategy, including investments in our digital platforms.” He went on to detail the reopening trend, “As consumers seek to re-engage with each other, we are seeing promising signs that our core customers are shopping again, and we continue to attract new customers, who increasingly begin their shopping experience with us online. Customers are shopping categories that have been strong throughout the pandemic, including home, fine jewelry and watches, fragrance, and luxury items. And we’re encouraged by the improvement we’re seeing in special occasion categories as customers begin to travel and return to a pre-pandemic lifestyle. We also have emerging opportunities in new categories and brands, including toys, health & wellness, pet and home décor.”  

Raised fiscal 2022 Guidance

The Company raised full-year fiscal 2022 EPS in the range of $1.71 to $2.12 versus $0.68 consensus analyst estimates, up from prior $0.40 to $0.90 guidance. Macy’s raised it full-year 2022 revenues to come in between $21.73 billion to $22.23 billion versus $20.57 billion consensus analyst estimates, up from prior guidance between $19.75 billion to $20.75 billion. The Company has transformed into a true omnichannel player by bolstering its digital transformation.

M Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for M stock. The weekly rifle chart has a pup breakout with the 5-period moving average (MA) at $18.82 powered by the stochastic mini pup. The 15period MA sits near the $17.63 Fibonacci (fib) level. The weekly formed a market structure high (MSH) sell trigger under the $16.50. The daily rifle chart is stalled on its downtrend as the 5-period MA flattens at $18.04 with the 15-period MA at $18.56. The daily stochastic is attempting to cross up. This sets up a daily market structure low (MSL) buy trigger on a breakout close above $18.71, which could propel prices towards the daily upper Bollinger Bands (BBs) at $20.24. If shares reject on the MSL trigger, then watch for the daily stochastic to form a mini inverse pup as shares fall under the daily 5-period MA towards the lower BBs near the $16.86 fib. Opportunistic pullback levels sit at the $17.63 fib, $16.86 fib, $16.51 fib, $16.08 fib, $15.56 fib, $14.97 fib, $14.31 fib, $13.56 fib, and the $13.11 fib. Keep an eye on peers JWN and GPS as they tend to move together. Upside trajectories range from the $20.15 fib to the $24.22 fib.