Credit Suisse Maintains Positive Outlook on Macy's

In a report published Thursday, Credit Suisse analyst Michael Exstein reiterated an Outperform rating and $60.00 price target on Macy's M. In the report, Credit Suisse noted, “While Macy's was not immune to the difficult selling environment, the company exhibited clear control over its margins and expenses, and continues to consistently execute on its strategies. Reported comp sales declined -1.4% year-over-year, coming in line with lower informal market expectations following KSS and JCP's reduced sales guidance. The company held gross margins flat, with merchandise margins only modestly declining despite the competitive promotional environment. Expenses slightly improved, even excluding benefits from the timing shift of one-time SG&A items. The company has made clear that margins are unlikely to expand further as it focuses on gaining market share. In terms of its strategy, focusing on tailoring its merchandising to the needs of the customer appears to be working—the company posted continued gains in handbags and Millennial ready-to-wear. At the same time, the company's capital allocation story remains disciplined and rational, as it continues to repurchase shares, grow its dividend, and avoid overlevering. As the retail industry nears its sixth year of the recovery, in an environment of decelerating sales and rising costs, Macy's remains one of the few retailers with a validated strategy and consistent execution. We adjust our '14E EPS estimate to $4.37, incorporating the 3Q result.” Macy's closed on Wednesday at $61.57.