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Is Macy's Still a Buy?

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  • Description

    JPMorgan retail analyst Matthew Boss on whether you should invest in Macy's stock.

  • Duration 4:02
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This transcript is automatically generated

So much.

Well at 38%.

Increase in first quarter earnings for Macy's but those stock.

Is actually have been trading -- all throughout the morning take a look at Macy's shares on a dollar 43 right now Jason -- -- -- -- -- -- he -- Macy's.

One of the forecast wasn't -- -- sell -- was able forecast do you think.

So it's a combination of things with Macy's the bottom line number was god.

The gross margin came in a little bit worse than expected it was down 27 basis points vs our estimate at nineteen basis points.

And the second thing is that Macy's did not flow through their one QB.

So their full year guidance so they maintain their full year.

And and many are saying that that would be implicitly lowering their second half -- second half forecast.

You've got an overweight on the stock price target is 46 you actually wrote to your clients and said if there isn't a moment during the conference call to buy the stock.

You should -- the stock that's a move that you would make today conference call is this morning how do you feel now.

Yes so does the stock is off its lows you know it's one couple things that we that we thought were opportunities here in and and opportunities beyond the conference call today.

And -- what piece of the gross margins were flat.

And that's the real -- of the business here.

The omni channel initiative which is the ability to service online in the stores.

That's what's hurting the gross margin and that is a long term opportunity and benefit for the company.

Mean one thing that I would say taking a step back.

There ebitda margin so there operating profit was up 76 basis points and our model was -- 42 -- so the underlying profitability here.

Was stronger than the next fact that.

During the conference call that the CFO the company it made a very interesting comment that actually caught a lot of attention investors' attention that they were gonna get benefit -- Absolutely we're gonna get benefit from JC Penney but initially when the earnings came out this morning.

That was not the streaks initial take.

What's your take now -- -- JC Penney can they'd benefit.

From the missteps.

That -- -- JC Penney is making right now.

So I I think they have been benefiting to an extent.

Since JC -- changed its pricing structure on not on February 1 I mean people talking about JC -- top line down 15% or more.

Throughout the quarter so I think Macy's has been seeing some benefit to date I think the real opportunity but some are missing is actually.

In the fourth quarter of Macy's is gonna cycle.

When JC -- -- fire sale inventory JC Penney keep in mind.

When they were clearing inventory for the February 1 launch of this new store experience.

They were selling items at a dollar and two dollars.

And that's one thing that I think could benefit -- this upcoming holiday season it's -- going bad that extreme discounting that took place.

Let's talk about hit a Macy's the first big retailer major -- -- -- -- for this earnings season for this quarter this gives us a sense of kind of consumer spending overall wanna -- your take on that and also.

With regards to what you're expecting we're going to be hearing from -- were going to be hearing from Nordstrom's.

A what is your outlook for those companies as well Matthew.

Yeah.

I think I think what people are gonna walk away from this out this earnings season is that underlying core trends in retail are stable.

The question on investor's minds is are we seeing real acceleration I think.

You know Macy's is a market share winner.

They are seeing acceleration in their same store sales.

When you look at -- -- story line is it is -- for the back half they're hoping that some new product launches.

Could could accelerate their trends as we get into the third quarter in the fourth quarter I expect the calls this going to to speak to.

-- lackluster trends continuing into the second quarter.

And with Nordstrom more moving higher ends I mean they have experienced in and continue to see industry leading sales and I expect that to continue.

Well the stock is called -- but does that that stock is actually down about 8% the last six months some good news has probably needed for those.

Shareholders -- -- he busted American retail analyst Matthew thank you absolute.

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