Macy’s Inc. (NYSE: M) is scheduled to release its fiscal third-quarter financial results before the markets open on Thursday. The consensus estimates are calling for breakeven earnings per share (EPS) and $5.32 billion in revenue. The same period of last year reportedly had $0.27 in EPS and $5.4 billion in revenue.

Until earlier this year, Macy’s had been on a path to renewed growth. Jeff Gennette, chief executive officer since March 2017 and board chair since February 2018, began to close stores and change the focus of what the surviving stores did. The industry thought well enough of Gennette to make him chair of the NRF Foundation, an industry honor. At the end of last year, the press began to seek out Gennette to talk about his formula. In fact, he told Women’s Wear Daily last November that he had a “recipe for success.” Well, that didn’t last long.

Gennette’s formula was a series of programs that, in sum, were focused on an improved balance sheet, a more powerful online presence and much higher sales per square foot in its stores. Some of its lower-performing stores would need to be closed in the name of cost-efficiency. Stores were remodeled, some real estate sold and Macy’s e-commerce lines were broadened and more aggressively promoted. David Swartz of Morningstar described what went wrong as he examined Macy’s plans, “While the initiatives may be sound, we don’t expect them to bring in vast numbers of new shoppers. We note that Macy’s same-store sales have been weak even as e-commerce has grown. We think Macy’s has been slow to respond to competitive threats.” Swartz believes Macy’s did not close enough stores.

Macy’s also made the kind of mistake that Wall Street punishes most brutally. It lowered its earnings guidance the last time it reported numbers. Investors rely on company guidance to make investment decisions. For the second quarter of this year, revenue was flat at $5.55 billion. However, net income dropped from $166 million to $86 million. The mediocre results were not enough to stand up under the pessimism about the future. Shares plunged and have not recovered.

Overall, Macy’s has underperformed the broad markets, with its stock down about 50% year to date. In fact, it is the second worst-performing stock in the S&P 500. In the past 52 weeks, the stock is down closer to 55%.

A few analysts weighed in on Macy’s ahead of the report:

• Credit Suisse has an Underperform rating and a $12 price target.
• Guggenheim has a Neutral rating.
• Deutsche Bank has a Hold rating with a $23 price target.
• Telsey Advisory Group rates it as Market Perform with an $18 target.
• JPMorgan has an Underweight rating.

Shares of Macy’s traded at $14.98, in a 52-week range of $14.11 to $35.06. The consensus price target is $17.71.

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