Are Macy's Shareholders In For A Surprise? PreMarket Prep Checks In

Sometimes the timing of when bad news is announced by a company can soften the impact of the potential price decline.

For example, when the news is released after the close on a Friday, there is a chance the Street may overlook or forget the bad news by Monday morning.

That was certainly not the case with Macy’s Inc. M in Monday’s session, making it the PreMarket Prep Stock Of The Day.

Early Move Out Of Consolidation Period: The S&P 500 index was stuck in a trading range that was not resolved to the upside until Friday. However, Macy’s 11-day range (Dec.16-Jan. 3) from $19.40 to $21.05 was resolved to the upside last Wednesday.

In that session, the issue cleared out the sellers at the $21 area and ended that session at $21.36. It posted a modest gain the following day and caught a strong bid on Friday along with the index.

After peaking intraday at $22.56, it backed off to end the session at $22.13. That marked its highest closing price since Dec. 8, when it ended that session at $22.98.

Tape Bomb: While many investors rejoiced over the long overdue rally in the index on Friday, shareholders of Macy’s were in a for a surprise.

Shortly after the close, the company delivered some bad news: a reduction in fourth-quarter sales and EPS guidance. The company now forecasted fourth-quarter sales of $8.161B-$8.401B vs. $8.31B estimate along with adjusted EPS of $1.47-$1.67 vs. $1.60 estimate.

The lack of robust follow-through spending during the holidays was identified as the culprit. The news did not go unnoticed as the issue shed nearly $1 from the close ($22.13), ending Friday’s after-hours session at $21.28.

PreMarket Prep Take: When the issue was being covered on the show, it was trading at the $21 area. Co-host Dennis Dick, noted the “sneaky” timing of the announcement and noted he was cautious about trying to “buy the dip” in the issue.

The author of this article alerted investors to the multiple lows at surrounding the $20 area since mid-December and identified it as a potential area of support.

M Price Action: After a low opening ($20.86 vs.$22.12), the issue had a slight rebound to $21.26 and then resumed its downward move. Within the next 15 minutes, the ensuing decline took the issue to exactly $20 and reversed course.

As of 1 p.m. ET, the rebound off that low had been capped at $20.69 and was now trading actively just above and below $20.50.

The discussion on the issue, as well as other issues in the retail sector can be found here:

Photo: Leonard Zhukovsky via Shutterstock