Sterne Agee Comments On Macy's SSS

According to Sterne Agee, Macy's

reported SSS of 7.4% exceeding our estimate of 5-6% and consensus of 4.3%. Sterne Agee said that two- and three-year SSS (8.9%/-1.0%) decelerated 300 bps 270 bps, respectively. “Year to date SSS were up 5.9%. Ecommerce sales were up 37.7% (+ 38.2% YTD). Management indicated that all geographies were positive, which is remarkable given the unfavorable weather trends. Fundamentals are remarkably strong and there remains an upwards bias to estimates, but we believe most of the upside is captured in the stock given multiple recent catalysts. We believe that any operating upside is likely to emanate from expense constraints given the increased comp guidance and credible, but aggressive GPM expectations. Incremental EPS drivers are likely to include the potential resumption of share repurchases as well as a debt recap. We believe that Macy's will not resume repurchases until credit metrics hit targeted levels around 4Q11, but we believe a debt recap (taking out immediate term maturities) is likely in the next 60 days. We remain on the sidelines as the recent run has captured most of the upside in the equity, most of the positive catalysts have already played out and the stock appears “overowned” at this point. We would become more conservative on a pullback or indications of accelerating comp trends.” Macy's closed yesterday at $28.28.