Macy's (NYSE: M) was up 15% following blowout second-quarter earnings and then added to these gains in the following sessions. The retailer seems to be in the midst of a successful turnaround as e-commerce sales continue to grow, in-person retail sales are bouncing back, approved $500 million in share buybacks, and is reinstating its dividend. Of course, a little more than a year ago, there were bankruptcy concerns as the company was shuttering stores and raising money to ensure that it could survive the slowdown.
Macy's also announced a partnership with Toys 'R Us as it would be opening 400 mini-stores within Macy's locations. The company believes that this will increase traffic to stores and follows many retailers opening mini-stores within their larger stores.
Inside the Numbers
In Q2, Macy's reported $1.29 in earnings per share which were substantially higher than analysts' expectations of $0.19 per share and above the company's forecast of $0.15 per share. Revenue also topped at $5.65 billion vs. $5.01 billion. In last year's Q2, the company reported a loss of $1.39 per share and revenue of $3.7 billion.
This was during the worst period of the pandemic when most stores were shut, and the company's e-commerce operations were not equipped to handle increased sales. Overall, same-store sales were 62% higher, better than expectations of a 41.1% increase. Online sales were higher by 45% on a 2-year basis and now account for nearly a third of revenue.
Due to this momentum, Macy's increased its revenue outlook for the full year to between $23.6 billion and $24 billion, up from its previous range of $21.7 billion to $22.2 billion. It now sees full-year EPS between $3.41 and $3.75 per share, up from its previous range of $1.71 to $2.12 per share. Both figures came in above analysts' forecast of EPS of $2.33 and revenue of $22.15 billion.
Given that many retailers had similar beats and hikes, it wasn't surprising that Macy's did also. However, the magnitude of Macy's beat was certainly not expected. So far, there has been little impact due to the recent spike in cases, although the company did warn that this could have an impact.
Stock Price Outlook
As of Thursday's market close, Macy's shares are up 96% year to date. Shares are nearing a breakout to new highs as it retests its February highs.
However, there are some reasons to sell into this strength. One is that the Delta variant is showing some impact in terms of slowing consumer spending based on real-time data. The second is that Macy's is going to face tough comps next year some sales may be inflated due to pent-up demand and stimulus checks.