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Why Macy's is a Screaming Buy After Its 40% Sell-Off

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Why Macy's is a Screaming Buy After Its 40% Sell-Off By Sean O’Reilly


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Why the recent pullback? Retailers recently reported third quarter earnings -- results were not good: Nordstrom reported same store sales of just 0.9% J.C. Penney reported strong same store sales growth of 6.4% but still managed to lose $137 million Macy’s suffered a -3.6% decrease in same store sales Operating income fell to $369 million from $422 million Q3 FY 2014


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Why the recent pullback? Cont. Retail sector quickly sold off:


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Historical Perspective Despite recent difficulties, Macy’s has been a top-competitor:


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Historical Perspective Cont. Macy’s Inc. Annual Results Source: S&P CapitalIQ


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Valuation Current Price: $37 Current Market Capitalization: $11.5 billion Current P/E: 8.4 Forward P/E: 8.9 Current Yield: 3.75% Current Price/Sales: 0.4 Source: S&P CapitalIQ


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Valuation Cont. Current valuation attractive in light of forward estimates: Source: S&P CapitalIQ


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Growth initiatives Macy’s has strong growth drivers going forward: Further planned store closures will drive returns on capital and sales per store upwards Omni-channel initiatives are impressive Shifting to tackle online-customers with massive distribution facilities Increased fulfillment capacities lowers the need for inventory investments at physical stores


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Bottom line Macy’s operating performance compared to its peers is exceptional Boasts a forward P/E of just 8.9 Analysts still expect annual earnings per share growth of 12% through FY 2020 Growth initiatives give company a buffer to consumer shift towards online shopping


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