Wednesday, September 2, 2020

What’s in Store for Macy's Q2 Earnings Release?

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News shaping
the markets today

     

What’s happening: Macy's, Inc is all set to report its results for the second quarter before the opening bell on Wednesday, September 2.

What happened: Brick-and-mortar retail stores have suffered a steep decline in footfall and sales amid the pandemic.

Although Macy’s has been investing to ramp up its online presence, its ecommerce sales have not compensated for the loss due to closed stores. The company is among the last and the most important retailers to report results for the latest quarter.

What are the estimates: The omni-channel fashion retailer is likely to report a decline in sales for the second quarter and swing to a loss.

  • Revenues are projected to decline to $3.47 billion, from $5.55 billion in the same quarter last year.
  • Macy's is expected to report a loss of $1.77 per share, versus a profit of 28 cents per share in the year-ago quarter.

Why it matters: Although Macy’s reported in-line results for the previous quarter, the 162-year old retailer had warned that consumers continue to stay home due to rising infections, resulting in lower traffic at its various stores.

Other retailers have faced the same fate, and shares of Kohl’s and Nordstrom declined after they reported their quarterly results.

Total consumer spending in the US fell 8% in August compared to the pre-pandemic levels, with the apparel and general merchandise industry declining by 10.7%. Although the decline is much less steep when compared to March or April, lower customer footfall in retail stores continues to plague retailers.

To avoid bankruptcy, Macy’s raised credit worth $4.5 billion in June. Management expects the pandemic impact to continue for some time and believes the company may not return to pre-pandemic profitability levels until late 2021 or 2022.

How shares performed so far: Shares of Macy’s gained 0.6% to close at $7.01 on Tuesday, and rose by 1% in after-hours trading. The stock has declined by 59% year to date, versus an 8% gain in the S&P 500 index.

What to watch: Markets will look out for growth in the retailer’s online sales and ability to survive the crisis. With daily covid-19 cases beginning to decline now, investors look forward to the company’s forecast for the year and management’s comments around a potential ramp up in store traffic and sales.

The Markets Today

     

European stocks will be in focus today, ahead of producer price data from the region.

Context: European markets closed mostly lower Tuesday as investors assessed economic reports from the Eurozone and China.

Details: The Eurozone reported inflation well below the consensus view, with consumer prices down 0.2% in August, versus market expectations of 0.2% rise. The unemployment rate for the region also increased to 7.9% in July, versus a revised 7.7% in the prior month. However, the figure was still below the estimates of 8%.

Meanwhile, China’s manufacturing activity expanded at its strongest pace in around 10 years, with the manufacturing PMI rising to 53.1 in August.

Shares of European chipmakers gained some momentum following reports of Apple estimating to sell 75 million 5G iPhones this year. Shares of companies supplying accessories to Apple, including Infineon, ASML and Dialog Semiconductor edged higher on Tuesday.

The pan-European Stoxx 600 index declined around 0.4% on Tuesday, despite starting the session in the green. While the French CAC 40 shed 0.2%, the German DAX 30 edged higher by 0.2%. The UK FTSE 100 slipped 1.7%.

What to watch: Markets await producer prices data from the Eurozone today. Industrial producer prices in the Eurozone, which rose 0.7% in June, are expected to gain 0.5% in July.

Markets will continue to monitor the covid-19 numbers, with total cases surging past 25.6 million globally.

Other Markets: US indices trading closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.76%, 0.75% and 1.39%, respectively.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s retail sales, UK’s Nationwide house price index, Spain’s unemployment change, Canada’s labour productivity as well as the US MBA mortgage applications, ADP employment, ISM New York index, factory orders, EIA’s crude oil stocks and the Fed’s Beige Book.