Macy’s Stock is Hitting on All Cylinders

Retail department store chain Macy’s NYSE: M stock is still running on all cylinders posting double digit revenue growth and exceeding the pre-pandemic levels of 2019. The Company has gone through a two-year digital transformation implementing its Polaris strategy to much success as its emerges from the pandemic as a better run operation that added 7.5 million new shoppers in Q4 2021 alone. The Company reinstated its dividend and is also implementing a $2 billion buyback program upon completion of its current $500 million buyback program. Despite supply chain and inflationary pressures, the iconic brand continues to drive top and bottom lines growth beyond analyst estimates. With shares currently trading at just 5.7X forward earnings, the sell-off in the benchmark indexes are providing value investors with opportunistic pullback levels to consider scaling into a position.

Q4 FY fiscal 2021 Earnings Release

On Feb 22, 2021, Macy’s released its fourth-quarter fiscal 2021 results for the quarter ending December 2021. The Company reported earnings-per-share (EPS) of $02.45 excluding non-recurring items versus consensus analyst estimates for a profit of $1.99, a $0.45 per share beat. Revenues rose 27.8% year-over-year (YoY) to $8.66 billion, beating consensus analyst estimates for $8.45 billion. Comparable same-store-sales (SSS) rose 28.3% YoY and up 6.6% compared to 2019. Digital sales rose 12% YoY and 36% versus 2019. Gross margins rose to 36.5%, up from 33.7% in year ago same period. The Company gained 7.2 million new shoppers in Q4 and generated $2.3 billion in free cash flow in 2021. The board of directors authorized a $2 billion stock buyback program after completing its current $500 million buyback and raised quarterly dividend by 5%. The Company retired debt in 2021 driving its year-end adjusted debt-to-adjusted EBITDAR leverage ratio well below the 2.5X target.

CEO Comments

Macy’s CEO Jeff Genette stated, “Our results in the fourth quarter delivered a strong end to a solid year. I am proud that Macy’s, Inc. outperformed expectations on both the top and bottom lines every quarter in 2021, despite COVID-19 related disruptions, supply chain issues, labor shortages and elevated inflation. Our business has momentum and is serving more customers at more touchpoints in their shopping journey.” He continued, “Our team began the large-scale work of transforming Macy’s, Inc. two years ago when we launched the Polaris strategy, and today we believe the evidence is clear – our business is stronger, more agile, and financially healthier. We are more digitally led and customer centric and believe we are better positioned for long-term sustainable and profitable growth,”

Raised fiscal 2022 Guidance

The Company raised full-year fiscal 2022 EPS in the range of $4.13 to $4.52 versus $4.02 consensus analyst estimates. Macy’s raised it full-year 2022 revenues to come in between $24.46 billion to $24.70 billion versus $24.37 billion consensus analyst estimates. It sees comparable owned plus licensed sales three-year CAGR of 1.1% to 1.4%.

Not Separating Digital Assets

The Company determined that omnichannel combined with acceleration of certain Polaris initiatives would deliver greater value to shareholders than the separation of digital and physical assets and to continue forward as one totally integrated company. Macy’s CEO Gennette commented, ““We are more confident in our path forward as one integrated company. The Board’s review reaffirmed our conviction that we are pursuing a robust strategy, and it provided us with greater clarity on several initiatives that could be further accelerated to unlock additional value for our shareholders, which we are pursuing,” said Gennette. “Our team will continue our work to deliver an even bolder and brighter future for Macy’s, Inc. and all its stakeholders, including our shareholders, our colleagues and our customers.”

M Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for M stock. The weekly rifle chart peaked abruptly near the $37.98 Fibonacci (fib) level. Shares proceeded to breakdown on a full stochastic oscillation through the 20-band. The weekly rifle chart downtrend is stalled in a make or break with a flat 5-period moving average (MA) and falling 15-period MA versus the weekly stochastic coil and mini pup attempt at the 20-band. The weekly 50-period MA support overlaps the $22.50 fib, and the 200-period MA overlaps the weekly lower Bollinger Bands (BBs) at $19.98. The weekly market structure low (MSL) buy triggers on a breakout close above $27.35. The daily rifle chart has been in an ever tightening range as the BB compression caps the range of the daily upper BBs at $27.84 and daily lower BBs at $23.15. The daily 5-period MA sits at $25.49 with 50-period MA at $25.78 and 200-period MA at $23.36. Opportunistic pullback levels sit at the $22.50 fib, $20.67 fib, $18.84 fib, $17.09 fib, and the $15.49 fib level. Upside trajectories range from the $28.41 fib up towards the $34.82 fib level.