Here's Why Macy's Stock Sees Sudden Rise on the Bourse

Shares of Macy's, Inc. M jumped 9.5% on Jul 5, 2024 amid reports that activist investor Arkhouse Management and partner Brigade Capital Management have again sweetened their offer for the biggest U.S. department store chain.
The Wall Street Journal reported Jul 3, 2024 that the firms raised their bid for Macy's by about $300 million to $6.9 billion. Their latest bid of $24.80 per share for shares they do not already own represents a 38.3% premium over Macy's closing price on Wednesday.
This would mark the duo's third offer for Macy's since December 2023. The two companies initially presented Macy's with a $21-per-share deal in December, which the board rejected. That led Arkhouse and Brigade to launch a proxy fight that ended when Macy's approved two board members backed by the investors after Arkhouse and Brigade came back in March with a $24-per-share bid.

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Growth Prospects of the Stock

The company is implementing a robust revitalization strategy aimed at securing its position in the competitive retail sector. Central to this strategy is a focus on operational modernization, technological integration and enhanced customer engagement.
Under the "First 50 Pilot" initiative, Macy's is strategically selecting 50 store locations to test new retail strategies, such as product introductions and visual merchandising enhancements. This initiative, spanning geographically diverse locations, has shown promising early results, including 3.4% growth in comparable sales and increased customer satisfaction in the first quarter of fiscal 2024. These insights are crucial for broader implementation across their stores.
Simultaneously, Macy's is bolstering its omnichannel presence by overhauling its digital platforms and marketing strategies. By integrating online and in-store experiences, and enhancing digital marketing efforts, Macy's aims to improve the overall customer journey and increase customer loyalty and conversion rates.
By launching the "A Bold New Chapter" strategy in fiscal 2024, Macy's aims to accelerate financial improvements through modernization and technological integration. This includes the closure of 150 underperforming stores and the enhancement of 350 others to optimize the company's real estate portfolio for increased profitability.
Technological advancements, particularly the integration of artificial intelligence, are expected to streamline Macy's supply chain and enhance inventory management, thereby improving operational efficiency and responsiveness to market demands.
Strategically, Macy's is pursuing asset monetization through the closure of stores and distribution centers, aiming to generate significant capital between fiscal 2024 and 2026. This initiative underscores the company's commitment to enhancing shareholder value and ensuring sustainable long-term growth. Having already raised more than $2.4 billion from real estate monetization between fiscal 2015 and 2023, Macy's is confident in its ability to secure financial stability and growth prospects.
Looking ahead, this Zacks Rank #1 (Strong Buy) company has set ambitious targets for 2025 and beyond, including achieving annual low-single-digit growth in comparable sales and mid-single-digit growth in adjusted EBITDA. It also aims to return to the pre-pandemic levels of annual free cash flow, demonstrating confidence in its cash earnings and financial flexibility.

Estimate Trend

The positive sentiment surrounding Macy's is reflected in the upward revisions of the Zacks Consensus Estimate for earnings per share. Over the past 30 days, analysts have increased earnings estimates for the current fiscal year by 24 cents. The consensus estimate is pegged at $2.79 per share. The estimate for the next fiscal year has also been raised by 24 cents to $2.80 per share.
The company has seen its shares rise 3.1% in the past six months, outpacing the Retail – Regional Department Stores industry's 0.3% growth. In the latest trading session, Macy's stock closed in at $19.64, nearing its 52-week high of $22.10, reflecting strong investor confidence and market optimism about the retailer's prospects. Additionally, trading above its 50-day and 200-day moving averages indicates robust upward momentum.

Three Other Solid Picks

Some other top-ranked stocks in the retail space are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Canada Goose GOOS.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Gap's fiscal 2024 earnings and sales indicates growth of 21.7% and 0.2%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie's fiscal 2024 earnings and sales indicates growth of 47.3% and 10.4%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Canada Goose is a global outerwear brand. It currently sports a Zacks Rank of 1.
The Zacks Consensus Estimate for Canada Goose's fiscal 2025 earnings and sales indicates growth of 13.7% and 5.2%, respectively, from the year-ago actual. GOOS has a trailing four-quarter average earnings surprise of 70.9%.

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