Macy’s and Dollar General slump in earnings and outlook; Target drops after demotion

Some retail weakness continued on Thursday amid earnings season underway as retailers grappled with high inventories and cuts in consumer spending. Macy's and Dollar General both eased early Thursday after their quarterly results and forecasts earlier this morning. The target continued to fade after JPMorgan downgraded TGT stock. Meanwhile, JWN stock rallied after Nordstrom beat quarterly estimates late Wednesday.




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Macy's cuts forecast

Macy's (M) Adjusted earnings fell 48% to 56 cents a share, while revenue fell 7% to $4.98 billion in first-quarter results early Thursday. FactSet analysts were expecting earnings of 45 cents a share on sales of $5.013 billion.

Comparable sales declined 7.2% for the period, worse than analysts' estimates of a 5.5% decline.

Despite beating Wall Street estimates, Macy's lowered its full-year outlook as it expects macroeconomic conditions for consumers to deteriorate. Macy's expects net sales of $22.8 billion to $23.2 billion for the year, down from the previous guidance of $23.7 billion to $24.2 billion.

The company also lowered its adjusted earnings guidance to $2.70 to $3.20 per share, down from the previous range of $3.67 to $4.11 per share.

FactSet is forecasting full-year earnings per share of $3.69 on sales of $23.73 billion.

M shares are down 3% early Thursday after falling as much as 10% premarket. Macy's shares are down nearly 36% year-to-date.

dollar total income

dollar general (DG) Earnings fell for the first time in three quarters. Earnings fell 2.9% to $2.34 per share. Net sales growth slowed after accelerating for four straight quarters, rising 6.8% to $9.34 billion. The results came in just short of FactSet's earnings estimates of $2.38 per share on sales of $9.47 billion.

Dollar General noted that the macroeconomic environment is more difficult than previously thought, which the company believes is having a significant impact on consumer consumption levels and behavior.

The discounter lowered its guidance for net sales to 3.5% to 5% growth from a previous 5.5% to 6%. Dollar General lowered its outlook, expecting unchanged earnings to an 8% decline. The company had previously forecast earnings growth of 4% to 6% from the $10.68 per share reported last year.

For the year, FactSet expects earnings per share of $11.20 on sales of $39.99 billion.

DG shares fell 20% on Thursday following the results. Shares are down 34.4% so far this year.

target downgrade

JP Morgan (JPM) downgraded Target stock to neutral from overweight early Thursday and lowered its price target on TGT stock to 144 from 182. The company believes consumer sentiment is becoming “broadly weaker.” And wallet stocks, or special consumer spending, are shifting away from commodities, which make up 51% of Target sales, JPMorgan analyst Christopher Horvers wrote in a note to clients.

Target's market share is positive on a three-year basis, but is losing ground on a one-year basis. That loss of market share could accelerate in the back-to-school season and continue into the holiday season due to consumer pressure and recent corporate controversy, Horvers wrote, which could cause corporate traffic to turn negative after 12 straight quarters of positives.

Target stock shed 1.6% early Thursday following its downgrade. TGT shares are down 20.9% since their May 17 earnings report. Target beat guidance for the first quarter but warned that the inventory decline will hurt profitability and lowered guidance for the second quarter.

Nordstrom profit increase

Luxury department store chain Nordstrom reported an increase in adjusted earnings to 7 cents a share in its first-quarter results late Wednesday, compared to a loss of 6 cents a year ago. Revenue fell 10.9% to $3.18 billion. Analysts polled by FactSet were expecting a loss of 10 cents a share on sales of $3.12 billion.

The company reported diluted loss per share of $1.27 for the period, which included a $1.92 per share impact from the winding-up of operations in Canada.

Nordstrom maintained its full-year guidance and expects sales to fall 4% to 6% as consumer spending falls and sales slow. The company forecast adjusted earnings of between $1.80 and $2.20 per share, excluding costs related to the closure of its Canadian operations. FactSet expects earnings to jump 18.3% to $2 a share on sales down 4.9% to $14.77 billion.

JWN shares were slightly down early Thursday after gaining 5.8% premarket. Shares are down 5.2% so far this year.

You can follow Harrison Miller on Twitter for more stock news and updates @IBD_Harrison.

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