Fly Intel: What to watch in Macy's earnings report

Macy's (M) is scheduled to report results of its first fiscal quarter before the market open on Wednesday, May 15 with a conference call scheduled for 9:30 am EDT. What to watch for: 1. TURNAROUND: Last year, Macy's CEO Jeff Gennette said he was "committed" to stabilizing its brick and mortar business, and that customers had been confused by "very complex" pricing. Macy's updated its strategic priorities for 2019 in February, saying it plans to renovate 100 more stores and further expand its selection online. Macy's also said it would invest in what it dubbed "destination businesses," dresses, fine jewelry, men's tailored apparel, women's shoes, beauty, and "big ticket." Further, Macy's plans to double the number of in-store pop-up market locations, build out its virtual reality furniture capabilities and slim down the upper management ranks. Beginning this year, the company expects the restructuring efforts to generate annual savings of $100M. 2. GUIDANCE: In February, Macy's forecast fiscal 2019 earnings per share excluding settlement charges of $3.05-$3.25, below analysts' consensus estimates at the time of $3.30. Net sales for the fiscal year were expected to be "approximately flat," with same-store sales on an owned plus licensed basis flat to up 1% and SSS on an owned basis flat to up 1%. While the company said it can achieve growth in comparable-store sales, that growth won't come immediately. Cleveland Research analyst Rusty Wilson lowered his Q1 owned comp store sales estimate for Macy's to down 0.5% from flat, citing weather headwinds and soft trends during Easter and the company's "Friends & Family" event. He noted that consensus calls for a 0.1% decline in owned comps in Q1 and also thinks gross margin will be pressured by elevated markdowns and promotions in Q1. 3. COMPETITIVE LANDSCAPE: Macy's has been faced with competition from fast-fashion retailers like H&M, as well as an increase in online shopping on Amazon.com (AMZN). Jefferies analyst Stephanie Wissink said in March that Amazon's launch of a value priced private label skincare brand, Belei, "came as a bit of a surprise," adding that her sense from contacts inside and outside of the e-commerce company is that the launch is meant to establish a stronger presence, refine a more robust beauty platform and provide data to improve access to national brands.

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