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Macy's shares are lowered on Wednesday despite strong earnings reports

Macy's (M) shares went on Wednesday despite a profit and loss account that was consistent with revenue expectations – and…

Macy’s (M) shares went on Wednesday despite a profit and loss account that was consistent with revenue expectations – and exceeded overestimated earnings per share.

The Cincinnati-based retailer reported $ 0.27 in earnings per share for the third quarter, analysts estimate estimated at $ 0.12 and hit the $ 5.4 billion revenue bar set by Wall Street.

Margin pressure for forthcoming negative factors such as customs, cost increases in the supply chain and rent increases appear to be clouds, especially as

Stocks of the 160-year retailer fell by 7.2% to $ 33.22 during Wednesday’s trading.

Fear of Shrinkage

Investors rarely hear words like “downsizing” or “reducing.” It seems to be part of the problem for Macy’s shareholders, because the managers broke the cardinal rule in a redemption call Wednesday morning.

CEO Jeff Gennette noted that the company moves more towards its “magnet” and “neighborhood” stores, described as less than the “flagship” types that occupy most of the property.

Unfortunately, part of this formula includes the weighing of parts of the stores and leaving blank shelves blank to reduce inventory costs.

The company’s initiative to “correct size” its stores in this way makes the market careful because it gives rise to thoughts about missing Sears (SHLD) stores that tried to conceal the company’s contraction from its feast. [1

9659002] In addition, modeling gains make it a bit difficult, as David Butler pointed out Real Money.

“Macy’s Q3 results were definitely favored by the sale of real estate,” he wrote in his column. “It contributed $ 42 million to operating profit and $ 0.10 to earnings per diluted share. While the sale of underperforming real estate is an entirely acceptable exercise, it’s not a sustainable long-term trend.”

Thus, the outcome was a little illusive given its one-off character.

Certainly, many see that the move is a rational and positive adaptation to the company’s needs.

“Macy has done a great job to rationalize its business space” Jan Rogers Kniff, President of J. Rogers Knife Worldwide Enterprises, told Real Money. “How bad news can be a mystery to me.”

Keep Positive

Still, it was a lot in the quarter and yet to come that can spark some optimism.

The company reported strong same retail sales growth, an increase of 3.3% against estimates of 2.8%, which helped raise its guiding figures for both earnings per share and sales in the same shop before the holiday.

“We are pleased with Macy’s, Inc. third quarter, which marks our fourth quarter in a row of comparable sales growth,” said Gennette in a statement. “Our strategic initiatives are accelerating and delivering results.”

A special listing was the expansion of the company’s digital business, which reported a strong growth quarter over the quarter, which strengthened sales while the company improved its mortar list. 19659002] “Macy’s recipe for success is e-commerce,” said Gennette on a conference call on Wednesday morning. “Our e-commerce industry only completed a quarter following double-digit growth driven by continued improvement in our online offer and experience.”

He noted that the company’s mobile app in particular is an important driving force for success and explains that the App will be a $ 1 billion driver in sales for the 2018 financial year.

The digital business also transfers to existing bricks, namely through call options. A comparable trend becomes apparent among most dealers who have had solid stocks in recent years, such as TJ Maxx (TJX), Kohls (KSS) and Target (TGT).

Still, questions about whether Amazon (AMZN) will simply continue to eat away at all winnings made online.

Amazon controls about 50% of US e-commerce in 2018, according to eMarketer. The report adds that this can only be accelerated because 80% of the e-commerce growth is expected to lead Amazon’s way next year. It represents a significant threat to Macy’s growth.

Guiding Higher to the Holidays

The Macy executives may have pointed a way further up, even during some headwinds, the quarter.

“The peak season is when Macy really shines,” explained Genette. “We have the right goods, right marketing and right customer experiences in place to deliver a strong fourth quarter.”

As such, Gennette revised both the net and comparable sales guidance upward on an annual basis.

Performance by sharing instructions was also raised to a range from $ 4.10 to $ 4.30, up from an earlier range of $ 3.95 to $ 4.15.

This also came with questions that Credit Suisse analyst Michael Binetti pointed out that many investors wonder if the bar could be moved too far forward.

“The market is looking at this and says” Is it as good as it will be? “he told CNBC in an interview. “Do we start slowing down here?”

As such, he was concerned that the bar raised from previous guidance could be hard to beat, possibly setting up the company for the fourth quarter break.

Analyst Action

Analyst Action

] Analysts overall believe there is still growth ahead, according to FactSet consensus figures.

The consensus price target for analytical research published last month is $ 39 per share and there are no analysts who issue a “Sell” rating.

Most analysts issue “Hold” rating, but the serious recovery today can offer a convincing buying process for Hussain investors.

Consensus payment would provide a double-digit premium to investors if it is correct. Consumer Strength

The latest macroeconomic figures and sector initiatives can add the thesis to a retailer like Macy, as they reflect the ability to spend free this high season on fewer options.

Earlier this month, the number of jobs increased by 250,000, and the salary charts its biggest annual profit since 2009. The higher capital base for a more working-in consumer is very good for the coming high season.

Retail is also much less crowded than once.

Notable among the departures are former business giants, Sears, now in bankruptcy and toys R Us, which will offer a few occasions to a retailer whom Macy wants to see market share from their fallen concurrent.

Liquidation of Bon-Ton (BONTQ) will offer another vacation wind to the company.

Gennette just touched this topic in his assessment of the upcoming holiday shopping period.

“As you probably expected, we have very little customer overlap with Sears so I do not see what’s affecting us much,” he told analysts. “When I look at something like Bon-Ton when it’s out of the Midwest, it definitely has affected us.”

He noted that Bon Ton shoppers tend to look for products that Macy wears, at a similar price point and nearby places pointing out that Macy is a recipient of the stranded shoppers.

“We’ve taken a great look at these customers,” said Gennette, adding that Macy’s also reached retailers for the coming holiday seasons will require a ramp-up in employment

The only one The question that comes from the sector’s consolidation is if it is only directed directly online. If so, Amazon is a winner once more.

However, it does not seem that Amazon will play like it used to be, especially since neither Sears nor Toys R Us were really killed by Amazon and online shopping

These buyers are likely to remain on real estate properties, rather than online.

Macy’s stock rises slightly after the market.

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