Earnings: Is Macy's In Line For A 7th Straight Quarter of Profit And Sales Declines?

Macy’s Inc M is one of the leading players in the department-store arena that has been challenged in recent years by the growing numbers of specialty retailers, the shift in consumer-buying habits, and consumers who remain reluctant to open their wallets in the aftermath of the last recession. What’s in the earnings bag for Q3?

Wall Street is anticipating Macy’s earnings to drop by double digits, in tandem with a single-digit tumble in revenues when the parent of Macy’s and Bloomingdale’s reports Q3 results ahead of the bell Thursday. If that pans out, it will be the seventh straight decline in quarterly profits and sales.

Estimize analysts note that the aggressive markdowns M has taken in recent months, coupled with the weak international tourism trends and currency headwinds will also shelve M’s results.

M warned Wall Street of what was ahead in both the Q1 and Q2 calls, and analysts say they will be listening to what the prospects are for the busy holiday shopping season, typically the most lucrative period for retailers. Last month, M said it had inked a deal with specialty-gift retailer Brookstone that would bring its distinctive merchandise to 347 stores and macys.com during the holidays. What are the expectations for this partnership?

Analysts also say they are looking for more insight into what plans may lie ahead in the closing and selling of stores. In late October, M said it had sold five stores to General Growth Properties (GGP) for $46 million, which was part of the retailer’s already announced plans to shutter weaker performing stores to focus on locales with the highest growth potential.

Analysts polled by Thomson Reuters are projecting a per-share profit of $0.41, down 26.7% from the year-ago earnings. Revenue is expected to ring up at $5.64 billion, off 5% from last year’s sales. Same-store sales, an important industry metric that measures sales at stores open longer than a year, are forecast to fall 2.8%.

Short-term options traders have priced in a potential share price move of 7.5% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform from TD Ameritrade.

In the weekly options, there’s been activity at the 40-strike calls and the 36 strike puts. In the December monthly options, activity has concentrated in the 37-strike calls and the 36-strike puts. The implied volatility is right in the middle at the 50th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.