Guggenheim keeps Neutral rating on Macy’s following Q4 update

Guggenheim analyst Robert Drbul notes that in conjunction with its participation in the ICR conference, Macy’s provided a Q4 update. While Macy’s saw Black Friday/Cyber Monday sales in line with the company’s expectations, the performance during non-peak holiday weeks was subpar, the analyst says. However, Macy’s noted a continued outperformance at Bloomingdale’s and Bluemercury as well as strength in occasion-based apparel and gift-giving business, Drbul says. Accordingly, he slightly reduces Macy’s Q4 revenue estimate to $8.22 billion, while his full year 2022 EPS estimate of $4.15 remains unchanged. Note that the analyst now expects end-of-year inventories at Macy’s to be slightly below last year and down mid-teens % compared to pre-pandemic levels. Drbul believes the Macy’s consumer will continue to be pressured in 2023, especially in the first half. While fundamentals and the overall health of the business are improving, he remains Neutral on Macy’s at these levels given the secular challenges on mall exposure and off-price competition.