Shares of department store operator Macy's (NYSE:M) fell 10% as trading got underway on Feb. 23. That said, by 10:30 a.m. EST the shares had clawed back some of the loss, sitting with a price decline of around 2%. The price volatility is related to earnings, which were something of a mixed bag.
Macy's fourth-quarter 2020 comparable-store sales were off by around 17% year over year. That's obviously not so good, but it represented an increase from the third quarter, suggesting that business is recovering from the coronavirus pandemic hit. Also positive is that digital sales rose 21% year over year, with digital now representing 44% of total sales. Adjusted earnings were $0.80 per share, which is actually not bad given that Wall Street was expecting a profit of $0.12 per share. So there was good and bad in the numbers, but it appears that investors chose to take a glass-half-full approach to the stock in early trading.
That's not an outlandish position, however, when you step back and look at the bigger picture. For example, the $0.80 per share in earnings was down from $2.12 in the prior year. And the full-year 2020 numbers were a total disaster, with an adjusted loss of $2.21 per share (which actually excludes $11.50 per share in restructuring and impairment charges) versus an adjusted profit in 2019 of $2.91 per share. So while Macy's management tried to point out the positives, there are still some material negatives to digest. Not least of which is that performance is still relatively weak compared to prepandemic levels.
Although Macy's business is clearly improving, it also appears there's still material work to be done in the company's turnaround effort. So it's not surprising that investors were a bit dour in early trading today. And while coronavirus vaccines could help shift the current outlook, it's important to remember that Macy's was struggling to get its business back on the growth track even before the pandemic hit. So the iconic retailer has a lot to prove, and one quarter isn't enough to prove it.