(Bloomberg) — Macy’s Inc. projected sales and earnings for the current year that outpaced Wall Street’s estimates — a sign that its efforts to boost online sales are paying off. Following the release, Fitch Ratings boosted the department-store retailer to investment grade.
The company sees full-year earnings of $4.13 to $4.52 a share, excluding some items, topping the $3.98 average estimate of analysts surveyed by Bloomberg. Macy’s projects net sales to be $24.46 billion to $24.7 billion, compared with the analyst estimate of $24.2 billion.
Fitch raised Macy’s debt to BBB-, citing strong sales and “some evidence of successful implementation” of its business overhaul. The company remains below investment grade at S&P Global Ratings and Moody’s Investors Service.
Same-store sales, a key metric in retail, rose 28% on an owned basis in the quarter ended Jan. 29, according to a statement Tuesday. That’s above the average estimate of about 26% from analysts.
Chief Executive Officer Jeff Gennette said Macy’s has overcome Covid-19 disruptions, logistics problems, labor issues and inflation pressures.
‘Watching Carefully’
“The things we’re watching carefully are what continues on the supply chain, what continues on with inflation and as we lap the stimulus package and really looking at that demand that we’re up against,” he said on the conference call with analysts.
A recent Bank of America Corp. report found that while inflation has curbed grocery spending for shoppers, it still hasn’t hurt apparel demand. Macy’s experience in its fourth quarter backs up that conclusion and could bode well for other retailers reporting in the coming weeks. Dillard’s Inc. also reported better-than-expected results on Tuesday.
Macy’s also provided an update on its e-commerce strategy along with its so-called Polaris business-improvement plan. The company’s board will seek to accelerate certain parts of the Polaris initiative, saying that would “deliver greater value to our shareholders than a separation of digital and physical assets at either the enterprise or brand levels.”
The retailer said in November that it was working with Alix Partners to evaluate a potential digital spinoff.
Macy’s also announced a new open-ended $2 billion share-buyback program after repurchasing $500 million in shares in the quarter.
The shares were about unchanged at 12:07 p.m. in New York trading, retreating from an earlier gain. The stock has declined about 2% this year.
(Updates with Fitch upgrade starting in first paragraph.)
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