More Bad News At Macy's, But Still Not At Lows (M)

Macy’s Inc. (NYSE: M) is seeing shares hold up better than you’d imagine if you would have gotten to see the news last week or even yesterday.  Traders are still reacting to headline news rather than addressing the current environment and trying to figure out how much bad news should already be priced into stocks as we enter a recession.

For starters, the huge department store’s same-store-sales came in down at -7.1%.  Because of the one-week differential, its total sales were down over 28% to $1.275 Billion.  But this 7.1% drop is even worse than its prior -4% to -6% range it had offered.  Macy’s also gave total quarterly sales of -2% at $8.597 Billion, although it had previously given a prior range of -2% to +1%. It has lowered guidance now to where it expects fourth quarter EPS in a $1.75 to $1.80 range, excluding merger costs of $70 million.  First Call had estimates at $1.71 EPS and $8.76 Billion in revenues.

Simultaneously, macy’s announced it would consolidate three divisions to reduce expenses and accelerate same store sales.  It will take $150 million in charges in 2008, but it will reduce SG&A by about $100 million.  Besides management changes, the company will be able to trim about 2,300 jobs.

We’ve already seen the company announce store closures, and back then we noted that there would be more changes coming.  This might not be the end of that, although it is obvious Macy’s is trying to reel in its cost structure.  Macy’s did fall as much as 6% before correcting itself.  We see sharesdown about 3% at $24.30 today.  The 52-week trading range is $20.94 to$46.70.

Jon C. Ogg
February 6, 2008