What Do Macy's 100 Store Closures Mean For The Company?

Macy's Inc M surprised analyst estimates after reporting strong earnings per share and revenues, sending shares up over 10 percent.

One comment in the quarterly report, however, left some investors scratching their heads on whether the news was good or bad for the company: Macy's announced it would close down about 100 full-line stores in the future as the company viewed its them as an impairment to the overall business.

UBS's Michael Binetti commented on the impact of the100 store closures and what it would mean for Macy's and the retail industry. The analyst maintained Macy's Neutral rating while raising the price target from $33.00 to $40.00.

Related Link: Cramer: Macy's Guided Down 'Too Far'

According to the analyst, Macy's was doing a good job responding to shifting shopping patterns by closing down stores. Binetti saw no evidence that the "next 100 closures would be the last."

The analyst claimed there were several positive outcomes that would happen as a result from Macy's shut down initiative:

  • Better same store sales path in the second half of FY16
  • Comparables "lift" in 2017
  • Better, ‘cleaner' inventories
  • Sales and administration cost cuts in the second half of 2017 to neutralize store closure revenue impact
  • Real Estate monetization

The analyst, however, lowered his 2017 EPS estimates from $4.63 to $3.51.

At time of writing, Macy's traded at $39.51, down 0.77 percent Friday.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsMichael BinettiUBS
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