Skip to Content
Morningstar

Macy's: Top-Line Gains, but No Sign of Competitive Edge

We don't intend to alter our long-term outlook and think the stock is overvalued.

No-moat

As a result of Macy's solid start to the year, management raised its full-year earnings per share guidance by $0.20 at the midpoint, to $3.75-$3.95 versus our prior $3.62. We are likely to edge up our $29 fair value estimate to reflect a slightly more favorable near-term outlook. However, we don’t intend to alter our long-term outlook for a 1% sales decline on average over the next five years and operating margins falling to 5% by fiscal 2021, against the 8% three-year historical average, as we expect rent and salary savings from store closures will be offset by ongoing pricing pressure and mix shifts to e-commerce. With the double-digit uptick in the share price after the earnings release, we now view the stock as modestly overvalued and suggest awaiting a more attractive risk/reward opportunity before building a position in the name.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

More in Stocks

About the Author

John Brick

Equity Analyst

John Brick, CFA, is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers retail defensive names, including large general merchandise retailers, sporting good manufactures, and grocery/distribution names.

Before joining Morningstar in 2017, Brick worked at Arkansas-based Stephens Inc. where he covered various consumer companies. Prior to that, he worked at Chicago-based Vilas Capital, where he was a generalist on a long-short hedge fund. Brick began his career at Northern Trust as a private equity analyst.

Brick earned a bachelor’s degree in finance, with minors in economics and decision sciences, from Miami University’s Farmer School of Business. He holds the Chartered Financial Analyst® designation.

Sponsor Center