In light of the setback J C Penney Company Inc (NYSE:JCP) shares suffered late last month after lowering its full-year earnings forecast against a backdrop of the third-quarter earnings shortcoming from Kohl’s Corporation (NYSE:KSS), it would have been easy to assume the worst for Macy’s Inc (NYSE:M) stock when it reported its Q3 numbers Thursday morning. As it turns out though, the market liked what it heard from the retailer, sending Macy’s stock up almost 8% … one of the third quarter’s earnings season’s most pleasant surprises yet.
Yet, once the dust settles, there’s a good chance investors will realize Macy’s isn’t out of the proverbial woods yet.
Macy’s Earnings Recap
For its third quarter ending in October, the retailer earned an operating profit of 23 cents per share on sales of $5.28 billion, versus analyst estimates of 19 cents per share on revenue of $5.31 billion. The retailer turned $5.63 billion worth of sales into earnings of 17 cents per share of Macy’s stock in the comparable quarter from a year earlier.
Same-store sales were off to the tune of 4% overall, and lower by 3.6% counting revenue generated by square footage leased by third parties. Experts were only calling for a 2.9% dip in same-store sales. Last quarter marked the 11th straight quarter that same-store sales fell.
CEO Jeff Gennette commented of the Q3 results, “Overall, we’re pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017. Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position. A highlight of the third quarter was the launch of the new Star Rewards loyalty program — our best customers are responding positively. We also saw continued double-digit growth in digital and are encouraged by the potential of Backstage in Macy’s stores.”
Times Are Still Tough
Despite the mostly disappointing quarter and less-than-thrilling outlook, Macy’s stock jumped sharply on Thursday, with investors convinced the weakness had more to do with mild weather and hurricanes and less to do with the ongoing deterioration of the retail industry.