On Thursday, JPMorgan maintained its Overweight rating and $23.00 price target on Macy's shares, traded on the New York Stock Exchange under the ticker NYSE:M. The firm's stance comes with a positive outlook on the retailer's potential for gross margin expansion and inventory management improvements.
Macy's management has highlighted additional factors that could drive gross margin growth beyond fiscal year 2024, including a better mix of apparel, private label enhancements, and delivery optimizations.
The company has shifted its focus to refining the quality of its inventory, particularly in terms of category and brand mix. This strategic shift comes after Macy's successfully managed inventory quantities, achieving a 100 basis points improvement in gross profit margin (GPM) compared to fiscal year 2019, with second quarter-ending inventories down 13% from that year.
The Chief Financial Officer of Macy's, Mitchell, has expressed a commitment to keeping selling, general, and administrative (SG&A) expense growth below the rate of inflation, aiming for an increase of less than 2-3% annually. This disciplined approach to expense management is part of the company's broader strategy to strengthen its financial position.
JPMorgan's price target is based on a multiple of 3.5 times the firm's projected fiscal year 2026 EBITDA, which mirrors Macy's 10-year pre-pandemic trough multiple. The financial model used by JPMorgan assumes flat total consolidated same-store sales (SSS) growth in fiscal year 2025, which is more optimistic than the Street's expectation of a 0.4% decline.
Additionally, the model predicts a 1.0% increase in SSS growth for fiscal year 2026, again surpassing the Street's forecast of a 0.7% decrease. The anticipated adjusted EBITDA margins for fiscal years 2025 and 2026 are set at 8.7%, aligning with current market projections.
In other recent news, Macy's Inc. (NYSE:M) has been actively preparing for the holiday season, announcing plans to hire over 31,500 seasonal workers to meet the anticipated surge in customer demand.
TD Cowen has maintained its Hold rating on Macy's stock, acknowledging the company's efforts to expand its luxury segment and the impact of Bloomingdale's recent campaign. The firm's affirmation of the $17.00 price target indicates a neutral outlook on the stock's short-term movement.
Macy's has also completed the early tender phase of its cash tender offer, successfully purchasing up to $220 million in aggregate principal amount of certain outstanding debt securities. The company launched a contemporary menswear brand, Mode of One, following a two-year development process, expanding its product portfolio.
On the financial front, Macy's reported a mix of results in the second quarter of 2024. While the company experienced a 1% comp sales gain at top-performing stores, it also faced a 3.8% decline in net sales and a 3.3% decline in overall comps. The company's full-year net sales are expected to range between $22.1 billion and $22.4 billion, with adjusted diluted EPS for the third quarter projected to range from a loss of $0.04 to earnings of $0.01.
InvestingPro Insights
As JPMorgan maintains its positive stance on Macy's, with an Overweight rating and a $23.00 price target, the retailer's financial health and market performance provide additional context for investors. According to InvestingPro data, Macy's has a market capitalization of $4.12 billion and a price-to-earnings (P/E) ratio of 22.31, which signals investor confidence in its earnings potential. Notably, the company's P/E ratio for the last twelve months as of Q2 2025 stands at a lower 4.35, suggesting a more attractive valuation relative to earnings.
InvestingPro Tips indicate that Macy's is expected to see net income growth this year, and it remains a prominent player in the Broadline Retail industry. Despite recent price volatility, the company has upheld its commitment to dividend payments for 22 consecutive years, which could reassure investors looking for stable income streams. Additionally, with liquid assets surpassing short-term obligations, Macy's appears well-positioned to manage its financial obligations in the near term.
For those seeking more comprehensive analysis, InvestingPro offers additional tips on Macy's and its industry peers, providing a deeper dive into financial health and market trends. With 7 analysts having revised their earnings estimates downwards for the upcoming period, it's crucial to stay informed on the latest data and expert insights available through InvestingPro.
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