On Tuesday, CFRA announced a downgrade of Macy's (NYSE:M) shares from Buy to Hold, adjusting the price target from $19.00 to $18.00. The firm's decision comes after a reevaluation of Macy's fiscal year 2025 earnings per share (EPS) estimate, which was reduced to $2.50, a $0.75 decrease from previous estimates. Moreover, CFRA initiated its fiscal year 2026 EPS estimate at $2.60.
Macy's reported a fourth-quarter normalized EPS of $2.45, surpassing the consensus estimates by $0.46, with revenues reaching $8.12 billion. Despite this beat, revenues fell slightly short of the expected $8.26 billion.
The quarter witnessed varying performance across Macy's brands, with comparable store sales declining by 4.7% year-over-year at Macy's, 1.6% at Bloomingdale's, and an increase of 2.3% at Bluemercury.
The company highlighted the strength in Beauty across all brands during the fourth quarter. Macy's also reported a significant improvement in merchandise margin, which was up 260 basis points year-over-year, attributed to reduced clearance markdowns.
Inventory levels were reported to be 2% higher than the previous year but still 15% below the levels of 2019, suggesting a healthy inventory status.
Macy's has unveiled a new strategic plan titled "A Bold New Chapter," aimed at repositioning the company. The retailer provided earnings guidance for fiscal year 2025, projecting EPS to be between $2.45 and $2.85, which is below the expectations set by CFRA.
The firm believes that Macy's shares are currently fairly valued as the company undergoes a transition in fiscal year 2025.
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