Macy’s (M) was flying high up until a few days ago, when it reported earnings and saw shares sell off sharply as a result.
But the department store giant remains up 15% year-to-date in 2013 even after the declines, and the brief pullback makes for an attractive opportunity in Macy’s stock.
Remember, Macy’s missed earnings expectations but was still growing; its 7.5% EPS bump missed the 16% Wall Street was looking for. Also a big disappointment was a same-store sales decline of 0.8% vs. expectations of 2.3% growth.
However, Macy’s is still expecting 2% to 3% growth in same-store sales this year. It remains the strongest of the mall retailers and pays a decent 2.2% dividend to boot. After the selloff, Macy’s is now trading for a fairly attractive forward price-to-earnings ratio of about 10 and could be a strong long-term buy at current levels.
There’s a risk sales will continue to soften, but based on a long history of efficient management and growth, the latest miss might have been a one-time event — and a good buying opportunity before the run continues. After all, Macy’s is up 160% since January 2010 — more than triple the S&P 500. This retail stock has consistently outperformed, and that’s worth something.