Macy's will be the first department store retailer to release its quarterly earnings. Macy's will release its earnings tomorrow May 11 before the open at ~8am ET followed by conference call at 9am ET. 

Q1 Expectations: EPS of $0.37 vs $0.56 year ago on sales -4.3% y/y to $5.96 bln.

Macy's said comp sales are expected to be below a year ago in the first nine months of the year. Q1 year ago comps were -0.1% on an owned plus licensed basis and -0.7% on owned basis.

Guidance

  • Fiscal 2016 guidance(fiscal 2016 EPS / comps /sales guidance in the press release):
    • Prior guidance included: EPS $3.80-3.90 (vs $3.79 consensus), comparable sales on an owned plus licensed basis to decline by ~1% with comparable sales on an owned basis to be ~ 50 bps lower. With the impact of 40 store closures, total sales are expected to be down by ~ 2% to ~$26.54 bln (in-line with consensus).
    • Guidance includes asset sale gains of ~ $235 mln, including estimated $86 mln of the gain for Brooklyn. The remainder of the Brooklyn gain is expected to be booked in 2017. The gain for Brooklyn will be booked quarterly based on the amount of construction completed each quarter. Anticipate that about a quarter of that expected gain of the $86 mln will be booked in H1 with the other remainder in the back half of the year.

Margin related:

  • Q4 gross margin rate declined 290 bps to 37.4%. At the start of the quarter, co had expected lower gross margin rate, however, the actual rate was worse than expected as a result of the weak holiday sales and the desire to start 2016 with the right inventory level.
  • Margin Guidance: Only given during the call (if at all). 2016 gross margin to increase vs 39.1% in fiscal 2015 (but to the 40.1% level seen in 2014). Gross margin rate is assumed to decline in Q1 and Q3, in the first because of the lingering impact of the tough Q4, and in Q3 because of the strong 2015 performance.

TECHS:

Upcoming Department Store Earnings Releases: Kohl's (KSS) reports earnings May 12 before the open, Nordstrom (JWN) May 12 after the close, JC Penney (JCP) May 13 before the open, Sears (SHLD) early June