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Why Macy's Stock Soared Today

By Joe Tenebruso – Aug 19, 2021 at 1:59PM

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The department store chain shocked investors by reinstating its dividend.

What happened

Shares of Macy's (M -1.13%) surged on Thursday after the retailer delivered stronger-than-expected earnings in the second quarter and said it would resume dividend payments to shareholders. 

As of 1:15 p.m. EDT today, Macy's stock price was up more than 20%.

So what

With the economy reopening and more people shopping inside stores once again, Macy's net sales rocketed 58.7% from their pandemic lows in the second quarter of 2020. Broad-based growth across its merchandise categories helped to fuel a 62.2% increase in comparable-store sales.

"We successfully reengaged core customers and attracted new, younger customers with new brands and categories," CEO Jeff Gennette said in a press release.

A person is shopping at a retail store.

Shoppers are returning to department stores faster than many investors expected. Image source: Getty Images.

Better still, inventory and cost-reduction initiatives helped to bolster Macy's profit margins. The retailer saw its adjusted earnings per share improve to $1.29 from a loss of $0.81 in the year-ago period. That was far above Wall Street's estimates for adjusted EPS of $0.23. 

Now what 

This strong performance and positive ongoing sales trends prompted management to boost its full-year revenue and profit forecast. The company now expects to produce net sales and adjusted EPS of $23.55 billion to $23.95 billion and $3.41 to $3.75, respectively. That's up from its previous guidance for revenue of $21.73 billion to $22.23 billion and EPS of $1.71 to $2.12.

Perhaps the biggest news was Macy's decision to reinstate its quarterly dividend of $0.15 per share and begin a new $500 million stock buyback program. Management said Macy's $2.1 billion in cash reserves, reduced debt levels, and greater profit generation made it possible to take these investor-friendly actions. 

"We are now well positioned to strengthen our business, enhance our long-term financial stability, and return capital to our shareholders," CFO Adrian Mitchell said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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