Sometimes it just isn't enough for a company to beat analyst estimates when it publishes quarterly earnings reports. At first glance, Macy's (M -3.09%) second quarter looked rather good, especially since the famous retailer topped the consensus projections for both revenue and profitability.
But that earnings news wasn't all good, and quite a few investors traded out of the stock. According to data compiled by S&P Global Market Intelligence, across the trading week, Macy's share price declined by almost 10%.
A pair of convincing beats, but...
Another factor was a slide in Macy's total revenue; for the quarter, this dipped by nearly 3.5% year over year to just under $5.1 billion. Comparable sales fell by close to that percentage rate, slipping by 3.3%.
The bottom line looked significantly better. Under generally accepted accounting principles (GAAP) standards, the retailer flipped to a net income of $150 million, or $0.53 per share, against a loss of $30 million ($0.08) in the same quarter of 2023. The per-share earnings figure was the same on a non-GAAP (adjusted) basis.
The good news was that revenue and, especially, profitability were higher than analyst estimates. The bad news was that management cut its guidance for both revenue and comparable sales, even as it kept its adjusted earnings forecast intact.
A fresh round of analyst price target cuts
Given the many struggles Macy's has endured during the slog that has been the retail apocalypse, both investors and analysts get spooked by moves like guidance cuts. In the wake of the earnings report, numerous pundits reduced their price targets on the stock.
Among these was Citigroup's Paul Lejuez, who shaved $1 off his Macy's price target for a new level of $16 while maintaining his neutral recommendation. Lejuez wrote, "In an environment where consumers are searching for value, it isn't easy for Macy's to differentiate itself from competitors that have more mindshare for value."
