Macy's Earnings: 'Decelerating Sales And Lack Of Margin Growth' To Perpetuate A Cycle

Shares of Macy's, Inc. M are down on Tuesday afternoon, in anticipation of the announcement of the company’s first quarter financial results on Wednesday, after the bell.

A look at crowdsourced site Estimize provides a clear idea of what to expect.

As it can be seen in the chart above, which features a history of Macy’s’ actual earnings compared to estimates, the company’s earnings respond to a cycle. Earnings tend to peak on the fourth quarter, and hit lows in the first and third quarters. And this quarter is no exception.

After delivering earnings of $2.44 per share on revenue of $9.364 billion last quarter, the Street expects earnings of $0.61 per share on revenue of $6.316 billion for the current quarter. The crowd is slightly more positive, and projects earnings of $0.62 per share on revenue of $6.374 billion.

These figures compare to earnings of $0.60 and revenue of $6.279 billion reported in the same quarter last year, and to EPS of $0.55 and revenue of $6.387 billion registered in the first quarter of 2013.

A second chart illustrates the evolution of estimates over time. As it can be seen, experts’ sentiment has been becoming increasingly bearish since January. The crowd weighed in just recently, and expectations have also been declining as earnings loom.

Macy’s Predicament

In a recent report, analysts at Sterne Agee CRT previewed mixed earnings for Macy’s. The experts expect earnings of $0.60 per share; the "estimate is predicated on 'flat' sales growth driven by a 1.9% drop in square footage, offset by the aforementioned 1.5% comp estimate,” the note explained.

Bottom Line: "Decelerating sales and lack of margin growth are rarely the ingredients for a winning investment and Macy's finds itself in that predicament..."