Macy's Is Unstoppable Following FY 2013 Earnings

Not only did Macy’s deliver strong earnings for fiscal year 2013, but it expects an even better 2014.

Apr 3, 2014 at 11:30AM

While its major competitors have continued to struggle, Macy's (NYSE:M) recently reported extremely strong earnings for FY 2013. Not only has the department store's same-store sales continued to rise, which implies further customer gains at the expense of its competitors Sears Holdings (NASDAQ:SHLD) and J.C. Penney (NYSE:JCP), but Macy's also guided investors toward even more gains in fiscal year 2013. This latest earnings release can only mean one thing: Macy's is continuing its domination of the department store sector, and its competitors need to make some drastic changes or risk being left in the dust.

FY 2013 Results
For the year ended Feb 1, 2014, Macy's earned $3.86 per share, which amounts to a total net income of $1.486 billion. This represents a big gain for the department store as Macy's produced $1.336 billion in net income, which amounts to $3.24 per share, in FY 2012. In fact, fiscal year 2013's gains represent the fifth consecutive year of double-digit earnings growth according to Macy's CEO and president Terry J. Lundgren, who also announced that the company's total net sales have "grown by more than $4.4 billion in the past four years" thanks in part to their innovative and successful "M.O.M." strategies. These figures serve as proof that Macy's has tapped into something big with the American consumer. Furthermore, net sales increased to $27.931 billion in FY 2013 from $27.686 billion in FY 2012. Shareholders should be satisfied that they own a piece of a company that knows how to drive its own profitability, as the company managed to generate $150 million dollars of additional net income on a sales gain, across all Macy's and Bloomingdale stores, of just $245 million. Clearly, Macy's is getting even better at what it does. 

An all-important financial measure in the retail world is comparable store sales. Macy's delivered strong results in this area as well, as this is the fourth year it has delivered comparable store sales growth across stores open more than a year. What's more impressive is how this retailer has performed against its peers.

 Company Name

Comparable Sales Growth FY 2013

Comparable Sales Growth FY 2012

Macy's

1.9%

3.7%

J.C. Penney

(7.4)%

(25.2)%

Sears Holding

(3.8)%

(2.5)%


Not only has Macy's managed to be extremely profitable as a department store, but it has done so in a way that has generated comparable sales gains at the expense of its peers. It's easy for a retailer that has lost customers, or is small, to show comparable sales growth, but Macy's has produced positive sales growth for five years in a row now despite its size, competition, and the economic factors working against it. Even though consumers' wallets are tight, consumers are still flocking to Macy's for its products, wide selection, and sales promotions.

Looking ahead
Macy's continues to project even better days ahead. It recently reiterated its FY 2014 guidance that its stores will experience a 2.5% to 3% sales growth above what was reported for FY 2013. It also announced earnings per share for the full year will come to approximately $4.50 per share. These gains are expected to be achieved by continuing to execute the company's omnichannel strategies and new store openings in cities like Las Vegas, Nevada, and The Bronx, New York, with a new Bloomingdale's store set to open in Alto, California, in order to replace an existing Bloomingdale's store.

Foolish takeaway
Macy's results have been nothing short of amazing for five years now, and they have no sign of stopping. Proof of this is in the company's own guidance, which, while given in the very early stages of fiscal year 2014, should not be taken lightly. In an economic environment where many retailers like J.C. Penney and Sears Holdings are having trouble posting comparable sales growth, Macy's not only delivers sales gains, but strong profits as well. The company's guidance may appear aggressive after a strong fiscal year in 2013, but given the company's record, Foolish investors should give it the benefit of the doubt. 

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Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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