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Feb. 21, 2017, 7:27 a.m. EST

Macy’s earnings: Shifts in retail are hurting major players

Macy’s has assets like real estate and brand identity, but shifts in the sector are putting pressure on earnings

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By Tonya Garcia, MarketWatch


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Shoppers are still heading to stores, but the pressure from e-commerce and other directions is hurting traditional retail earnings.

Macy’s Inc. is expected to announce fourth-quarter earnings on Tuesday.

Even a major player like Macy’s /quotes/zigman/467976/composite M +2.52%   isn’t immune to retail’s struggles. The sector is experiencing a dramatic shift to e-commerce and changes in consumer tastes and shopping behavior that have put pressure on department store earnings, and on the industry as a whole.

See also: From a risk-of-bankruptcy standpoint, the retail business is the new oil and gas

Read also: Retailers are expected to suffer big spike in bond default rate in 2017

Macy’s has already announced 100 store closures and thousands of job cuts, in addition to a reassessment of its real-estate assets. Now there’s buzz from reports about buyout talks with Hudson’s Bay Co. /quotes/zigman/12770516/delayed CA:HBC +1.69%  , parent to Lord & Taylor and Saks Fifth Avenue.

Macy’s shares have an average hold rating with a price target of $36.33,14.2% higher than Thursday’s close of $31.82.

Here’s what to expect:

Earnings: Analysts polled by FactSet expect earnings per share of $1.95, down from $2.09 the year before.

Estimize, a software platform that crowdsources estimates from buy-side analysts, hedge-fund managers and others, sees EPS of $1.98.

Revenue: FactSet analysts see sales of $8.61 billion, down from $8.87 billion last year.

Estimize sees sales of $8.57 billion.

Macy’s announced in early January that same-store sales on an owned-plus-licensed based fell 2.1% in November and December 2016 combined.

Share price: Macy’s shares are down 19.7% for the past year, and are down 25.2% for the last three months. The S&P 500 index is up 7% for the past three months.

Other issues: While e-commerce sales have been growing, reaching about 20% of total retail sales according to the latest Fitch numbers, the majority of sales are still happening at physical stores, a big reason not to dismiss them as relics.

“Beyond Amazon /quotes/zigman/63011/composite AMZN +2.14%  , much of the e-commerce share gains have been made by chains with a physical presence, like Wal-Mart /quotes/zigman/245476/composite WMT +0.60%  , Macy’s and Best Buy /quotes/zigman/219712/composite BBY +1.70%  ,” Fitch wrote in a note published Wednesday. “These companies have been able to leverage their existing brand identity, inventory position, and free cash flow generation to develop robust online businesses.”

/quotes/zigman/467976/composite
US : U.S.: NYSE
$ 29.27
+0.72 +2.52%
Volume: 6.21M
March 29, 2017 4:01p
P/E Ratio
14.67
Dividend Yield
5.16%
Market Cap
$8.68 billion
Rev. per Employee
$163,255
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/quotes/zigman/12770516/delayed
CA : Canada: Toronto
$ 10.25
+0.17 +1.69%
Volume: 482,545
March 29, 2017 4:00p
P/E Ratio
N/A
Dividend Yield
1.95%
Market Cap
$1.87 billion
Rev. per Employee
N/A
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/quotes/zigman/63011/composite
US : U.S.: Nasdaq
$ 874.32
+18.32 +2.14%
Volume: 4.24M
March 29, 2017 4:00p
P/E Ratio
178.28
Dividend Yield
N/A
Market Cap
$417.20 billion
Rev. per Employee
$398,322
loading...
/quotes/zigman/245476/composite
US : U.S.: NYSE
$ 70.74
+0.42 +0.60%
Volume: 6.86M
March 29, 2017 4:00p
P/E Ratio
15.38
Dividend Yield
2.88%
Market Cap
$216.11 billion
Rev. per Employee
$211,249
loading...
/quotes/zigman/219712/composite
US : U.S.: NYSE
$ 47.77
+0.80 +1.70%
Volume: 3.36M
March 29, 2017 4:00p
P/E Ratio
12.47
Dividend Yield
2.85%
Market Cap
$14.77 billion
Rev. per Employee
$315,224
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