Macy*s (M, $34.56) and its wholly-owned subsidiary, Bloomingdale’s, sells merchandise in 45 states. Macy*s just reported excellent December sales, a few store closures, new store openings, and good news on dividends and share repurchases.
"We are encouraged that Macy's continues to fine-tune its store portfolio. We believe that the company took advantage of lease expirations to close older, underperforming stores that required significant investment (7 of the 9 stores were opened before 1995), and also closed stores that were cash flow negative. Macy's also announced a new small format Bloomingdale's store (120k) that will open in Fall 2013, and we believe that the company has been pleased with the sales and returns offered by this format. We reiterate our Buy rating and $47 target price." -- Citi Investment Research and Analysis (CIRA), January 4, 2012
"Macy’s Inc. is raising its earnings outlook for the fourth quarter and full year due to a strong holiday season and says it will double its quarterly dividend to 20 cents a share. The retailer is also increasing its share repurchase program by $1 billion." -- Macy's boosts earnings outlook on strong holiday season; doubles quarterly dividend, WashingtonPost.com, Jan. 5, 2012
Macy*s is also expanding its small format Bloomingdale's stores. "The new Bloomingdale's stores that will open in Fall 2013 and Spring 2014 will reflect the company's smaller, 120k square foot format. Bloomingdale's has opened similar format stores in SoHo (NYC), Chevy Chase, MD, and Santa Monica, CA, in recent years, and management has been pleased with the results. These smaller stores offer a more localized fashion assortment and appeal to a more contemporary customer." -- CIRA, Jan. 4, 2012.
Wall Street consensus estimates project earnings (EPS) growth of 33%, 14% and 14% in fiscal years 2012 through 2014. The 2012 price earnings (PE) ratio is 12.4 and the new current dividend yield is 2.31%.
During the last decade, Macy*s stock price rose from the second Gulf War lows of $12 to a high of $46 in April 2007 before falling again to a low of $5 with the 2008 Financial Meltdown. Wow! It sure drives the point home of having an investment strategy and using stop loss orders, doesn't it?
Macy*s stock has been moving up in an orderly fashion since early 2009. The stock is just now breaking out of a $22-$30 trading range. A patient investor might still buy this stock at $31, but there's no shame in buying at the current price, locking in a good dividend yield, and watching the stock continue to rise in step with the company's earnings growth.
Macy*s stock could appeal to almost any investor, with a hefty dividend, attractive annual growth, and a wide enough trading range to accommodate stock traders.
Risk averse stock investors who are not willing to use stop-loss orders would probably best stay away from Macy*s stock.
For Townhall readers we’ve published our 2012 model portfolio for Trading and Aggressive Growth. For our subscribers, we’ve created model portfolios for Growth and for Growth and Income. We just posted some preliminary numbers on the portfolios.
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