Year to date, shares of Macy's (M) are up 23% as the company rebounds out of a disastrous year. Can the stock keep up the momentum or is it ahead of itself?
In the past six months, Macy's has exploded 37% higher as the company reported a better-than-expected first quarter in August and unveiled a plan to restructure its real estate portfolio.
In August, Macy's said it earned 54 cents per share, 18 cents better than expected. The results were driven by a higher gross margin and slightly lower expenses offset by a higher tax rate.
First-quarter same-store sales were down 2.6%, which was much better than the consensus estimate of a decrease of 5%. The improvement in comps was due to more favorable weather and an improvement in tourist spending. Management also held discounting to a minimum, which helped to halt the gross margin slide of the recent year. Gross margin at the end of the quarter was 40.9%.
While the results were certainly better than expected, it was the company's plan to restructure its real estate portfolio that got the Macy's bulls excited. The company said it would close as many as 100 underperforming stores (out of 728 total stores) and is in the process of selling its Union Square men's store in San Francisco. Earlier, Macy's announced it would sell its Brooklyn store.
The San Francisco men's store is expected to bring in $250 million, which includes a $235 million gain. The company will lease back the store for up to 3 years.