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News

Macy’s shares rise despite lowered guidance

 

Wednesday, August 24, 2022

The news shaping the markets today

Germany announced plans to supply Ukraine with additional military aid worth €500 million. The news sent the safe-haven US dollar index higher this morning.


South Korea’s Business Survey Index for the manufacturing sector came in unchanged at 80 in August, from the 21-month low reading in the prior month, exerting pressure on the KRW/USD forex pair.


Argentina’s economic activity estimator increased by 6.4% year-over-year in June, representing a slowdown from the 7.6% growth reported in the previous month. The news sent the ARS/USD pair lower in forex trading this morning.


Eurozone’s consumer confidence indicator climbed by 2.1 points to -24.9 in August, versus a record low of -27 in the previous month. Despite this, the EUR/USD forex pair remained under pressure.


US services PMI fell to 44.1 in August, from 47.3 a month ago. The latest reading signalled the sharpest contraction since May 2020 and sent the Dow Jones index lower by over 150 points on Tuesday.

 

What’s happening: Shares of Macy’s Inc gained on Tuesday, after the company reported better-than-expected results for its second quarter.

What happened: Macy’s said its bottom-line was impacted by the rise in prices of daily products.

The department store giant also lowered its annual guidance, citing macroeconomic pressures.

How were the results: The New York-based company reported a double-digit decline in earnings for its second quarter, but the figure still topped market estimates.

  • Sales slipped 0.83% year-over-year to $5.60 billion, surpassing the consensus estimate of $5.49 billion.
  • Adjusted earnings came in at $1.00 per share, down 22% from a year ago, but ahead of Street expectations of 85 cents per share.

Why it matters: Macy’s inventories were 7% higher by the end of the second quarter and the company is looking to offer higher discounts to reduce its apparel stockpiles.

The company’s comparable sales declined 1.5% on an owned basis and contracted 1.6% on an owned plus licensed basis, compared to the second quarter of 2021. However, compared to the same quarter in 2019, comparable sales were higher by 4.3% on an owned basis and 4.4% on an owned plus licensed basis.

Macy’s gross margins shrank 170 basis points year-over-year to 38.9%. As of July 30, 2022, the company held cash and equivalents worth $303 million, with net cash provided by operating activities coming in at $303 million for the past six months.

CEO Jeff Gennette said during the earnings call that luxury brands Bloomingdale’s and Bluemercury outperforming in the second quarter.

Management lowered their sales guidance for fiscal 2022 from $24.46-$24.7 billion to $24.34-$24.58 billion. The projection for adjusted earnings was also reduced to $4.00-$4.20 per share, from the prior forecast of $4.53-$4.95 per share.

How shares responded: Macy’s shares gained 3.4% to close at $19.31 on Tuesday, following the release of quarterly results. The stock also declined around 23% over the past six months.

What to watch: Investors will keep an eye on inflation levels, as a continuous rise in prices negatively impacts consumer discretionary spending, which could limit Macy’s overall growth ahead.

The markets today

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) data on stockpiles

Context: Crude oil prices moved higher, while natural gas prices climbed to a new 14-year high on Tuesday.

Details: Crude oil prices had recorded sharp losses on Monday, amid rising concerns of a global recession and a potential increase in supply from Iran.

However, oil prices rebounded on Tuesday, following comments from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, saying the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) has several ways to deal with such macro issues. The comments increased the likelihood of the OPEC+ cutting oil output and supported prices.

Natural gas prices rose sharply after Russia’s natural gas company Gazprom announced plans to shut down supplies to Europe via the Nord Stream 1 pipeline for three days from August 31 for maintenance.

Natural gas storage facilities in Germany are now at over 80% full capacity, despite a significant decline in deliveries from Russia amid the ongoing war with Ukraine.

WTI crude oil for October delivery surged $3.38, or 3.7%, to settle at $93.74 per barrel on the NYMEX on Tuesday. Brent crude for October delivery added $3.74 to close at $100.22 per barrel.

In other energy trading, wholesale gasoline for September delivery gained 4 cents to $2.93 a gallon, while September heating oil added 6 cents to $3.84 a gallon and September natural gas settled at $9.19 per 1,000 cubic feet, down 49 cents.

What to watch: Traders await the release of data on crude oil inventories from the EIA today. US crude oil stockpiles had declined by 7.056 million barrels in the week ended August 12, representing the sharpest contraction since early April. Experts expect crude inventories to decline further by 0.933 million barrels in the latest week. The release of data on gasoline and distillate stockpiles will also remain in focus today.

Other Markets: European trading indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.61%, 0.27%, 0.26% and 0.42%, respectively.

Support & resistances for today

Technical Levels News Sentiment
GBP/USD – 1.1808 and 1.1816 Positive
NZD/USD – 0.6182 and 0.6192 Positive
Natural Gas – 9.272 and 9.280 Positive
Nasdaq 100 – 12859.07 and 12907.12 Positive
Nikkei 225 – 28329.00 and 28368.50 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9948, -0.23%) Dow ($32,798, -0.31%) Brent ($100.11, -0.1%)
GBP/USD (1.1804, -0.26%) S&P500 ($4,116, -0.33%) WTI ($93.70, -0.1%)
USD/JPY (136.89, 0.11%) Nasdaq ($12,841, -0.43%) Gold ($1,757, -0.2%)

What else to watch today

Saudi Arabia’s balance of trade, South Africa’s inflation rate, Mexico’s mid-month inflation rate, US MBA mortgage applications, durable goods orders and pending home sales, India’s money supply M3, Brazil’s IPCA-15 consumer price index and federal tax revenue, Canada’s wholesale sales, Russia’s industrial output, as well as Argentina’s retail sales.


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