Macy’s Inc.’s shares rebounded Monday, almost erasing the 4.9 percent decline on Friday, after J.P. Morgan upgraded the stock to “neutral” from “underweight” and investors digested chief executive officer Terry Lundgren’s defense of the retailer.
Although retail stocks fared better Monday than they did during Friday’s torturous session, the rally in Macy’s shares was exceptional. The Standard & Poor’s Retail Index declined 0.6 percent to end the day at 325.99.
Macy’s shares closed at $16.28 in trading on the New York Stock Exchange, up 70 cents or 4.5 percent. The stock had declined 81 cents to $15.58 on Friday. Other strong gainers included Abercrombie & Fitch Co. (3.6 percent), The TJX Cos. Inc. (3 percent), American Eagle Outfitters Inc. (2.3 percent) and Aéropostale Inc. (1.7 percent).
Among those with large declines were Chico’s FAS Inc. (7.8 percent), Dillard’s Inc. (4.9 percent), J.C. Penney Co. Inc. (4.2 percent), The Talbots Inc. (2.2 percent) and Kohl’s Corp. (2.1 percent).
The J.P. Morgan upgrade was based principally on how steeply Friday’s trading had damaged the stock. “While we still think the company’s divisional integration holds a high degree of risk and that [second-half 2008 and 2009] Street estimates are too high, the stock at $15.58 appears to be more accurately discounting these issues today than about two-and-a-half months ago,” broadlines analyst Charles Grom said in a research note.
The quarter-to-date same-store sales decline of 1.9 percent, revealed in Lundgren’s letter to his management team and consequently to investors, was characterized as “no worse than feared.” Lundgren said Macy’s is doing better than the declines of 2.1 percent, 3.3 percent and 5.9 percent registered by Kohl’s, J.C. Penney and Nordstrom, respectively.
J.P. Morgan also backed Lundgren’s argument that fears about Macy’s liquidity are “unwarranted,” noting that, like Goldman Sachs Group, it had received “numerous questions from investors over the past two weeks.…Given that sales [quarter-to-date] are close to plan, it’s unlikely that Macy’s credit position has eroded further since the end of 1Q, which should alleviate these market concerns.”
Citigroup analyst Deborah Weinswig issued a research note late Monday titled “Liquidity Not an Issue.”
The J.P. Morgan research note was hardly a rubber stamp of Lundgren’s view. The brokerage house said Macy’s will struggle with year-ago comparisons in its home business, where Martha Stewart’s line was launched in 2007, and at Bloomingdale’s. The firm also expects the high-end/luxury business to become more promotional, pressuring gross margins, and for the retailer’s localization initiative to present “the risk that local consumer taste and placed orders may not perfectly align.”
J.P. Morgan said it considers Macy’s earnings-per-share guidance for the full year of $1.85 to $2.15 to be “too optimistic,” and advised the company to “take a page out of Kohl’s playbook and adapt a more conservative outlook. In particular, the company sees [same-store sales] down 1 percent to positive 1.5 percent, which looks too ambitious at this juncture.”
Even as it upgraded the stock, J.P. Morgan lowered its EPS estimates for the company to $1.77 this year and $1.75 in 2009, down from $1.83 and $1.85, respectively.
The note also chided Macy’s for its decision to stop providing quarterly guidance or monthly comps, saying it “has clearly backfired, in our opinion. To this end, the stock appears to be more volatile year-to-date than at any point in 2007.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews