On Wednesday, TD Cowen made a slight adjustment to the price target for Macy's (NYSE:M) shares, increasing it to $21.00 from the previous $20.00. The firm has retained its Hold rating on the stock.
The adjustment follows Macy's reported first-quarter performance, which surpassed expectations in certain financial metrics. The company's selling, general, and administrative expenses (SG&A) were notably better than anticipated, coming in at a 52 basis point improvement compared to the 310 basis points projected by the Street.
However, gross margin (GM) did not meet expectations, with an 82 basis point decrease versus the 138 basis point improvement the Street had forecasted. In light of the first-quarter results, Macy's has raised its guidance for the fiscal year 2024, largely due to the outperformance in the recent quarter.
The department store chain has seen positive developments in its First 50 stores initiative, which includes increased conversion traffic and customer satisfaction. TD Cowen's commentary highlighted these improvements as encouraging signs for the retailer's strategic efforts.
The analyst's note also pointed to areas of focus for monitoring Macy's future performance. These include the company's response to apparel weakness, changes to its private label offerings, the scalability of the First 50 store learnings to its broader fleet of stores, and the necessity for promotions in response to demand for warmer weather apparel.
The update from TD Cowen reflects a cautious optimism, acknowledging the progress Macy's has made in certain areas while also recognizing the challenges it faces in a competitive retail environment.
The new price target suggests a modest upside potential for Macy's shares, with the Hold rating indicating a wait-and-see approach to the stock's future movements.
InvestingPro Insights
With Macy's (NYSE:M) surpassing certain financial expectations in its first-quarter performance, investors may be seeking a deeper understanding of the company's valuation and market position. According to InvestingPro data, Macy's has a market capitalization of $5.55 billion, demonstrating its substantial presence in the retail sector. The company's price to earnings (P/E) ratio stands at 6.16, based on the last twelve months as of Q1 2025, which suggests that the stock is trading at a lower earnings multiple compared to some of its peers. This could be attractive to value-oriented investors.
InvestingPro Tips highlight that Macy's is expected to see net income growth this year and remains a prominent player in the Broadline Retail industry. Moreover, the retailer has a long-standing history of maintaining dividend payments, with 22 consecutive years of payouts to shareholders. This consistent dividend track record, coupled with a recent dividend growth of 5.02%, may appeal to income-focused investors.
For those considering adding Macy's to their investment portfolio, it's worth noting that the company has experienced a significant price uptick over the last six months, with a 37.61% total return. This performance reflects investor confidence and could suggest a positive outlook for the stock. To explore additional insights and tips, including 4 more exclusive InvestingPro Tips for Macy's, visit https://www.investing.com/pro/M. Don't forget to take advantage of an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.
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