U.S. Thanksgiving Day features the famous Macy’s parade in New York. It also marks the beginning of the Christmas season, the most important sales period for the big department stores. We assess how Macy’s investment in a major merchandising plan may affect its stock market investment prospects for the holiday season and beyond.
MACY’S INC. (New York symbol M; www.macysinc.com) operates 810 Macy’s and 41 Bloomingdale’s department stores in 45 states.
The company continues to benefit from its “My Macy’s” plan to tailor its merchandise to local tastes. This strategy has increased customer traffic in its stores and encouraged repeat visits. As well, the company recently settled some outstanding tax disputes; that lowered its overall tax bill.
Macy’s now plans to spend $400 million over the next four years on a major upgrade to its flagship department store at Herald Square in New York City.
This project will increase the store’s selling space by 8%. That will give it more room for popular merchandise, such as shoes, handbags and cosmetics. Work will begin in early 2012, and will continue through 2015. The company will complete the project in phases so the store can remain open during these renovations.
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Stock market investment: Macy expects same-store sales to rise
Macy’s sound balance sheet will let it keep expanding. It holds cash of $1.1 billion, or $2.61 a share. Its long-term debt of $6.2 billion is a manageable 49% of its market cap.
The company expects its full-year same-store sales to rise by 4.8% to 5.0%. As well, it now expects to earn $2.70 to $2.75 a share in fiscal 2012, up from its earlier range of $2.60 to $2.65 a share. The stock trades at 11.0 times the midpoint of the new range. The $0.40 dividend yields 1.3%.
In the December edition of Wall Street Stock Forecaster, we look at how Macy’s big spending plans are likely to pay off. We also discuss the state of retail spending in the U.S. and how it’s likely to affect the company as it seeks to build up its brands and its online business. We then conclude with our clear buy/sell/hold on Macy’s. The company is just one of 21 stocks we analyze in this issue of our Wall Street Stock Forecaster.
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