Macy's (NYSE:M) delivered positive earnings for its first quarter on the heels of an increased fiscal year outlook it gave at the end of April. The department store chain had been struggling for profitability through the recession. The company said its new local approach for merchandising in its stores is paying off.

IN PICTURES: Learn To Invest In 10 Steps

Macy's Upswing
The company earned $23 million in net income, after an $88 million loss in last year's quarter. Earnings per share hit a positive note at five cents, compared with last year's loss of 21 cents. Revenue grew from $5.19 billion to $5.57 billion. Same store sales were up over 5%. All these are good signs for the retailer, who despite its storied Macy's and Bloomingdale's brands, had felt the press of the recession.

More Positives
The new "My Macy's" approach implemented by CEO Terry Lundgren, allows small clusters of Macy's stores to be grouped together for quicker responses to customers for merchandising. This local approach, along with a new fashion brand deal for Sean John, Sean "Diddy" Combs' label, are attempts to continue to revitalize the company's wares. Although the first-quarter results were strong, the company is still cautious on the economy, yet optimistic on having a good year.

Competition
With its changes, Macy's has gotten ahead of some of its competitors, such as JCPenney (NYSE:JCP). Macy's has lowered prices on some items while Penney continues to struggle with its home products. JCP's April sales were down 3.3%, while Macy's were up 1.1%. Dillard's (NYSE:DDS) continued to lag, down 5%, and even star retailer Kohl's (NYSE:KSS) sales dropped 7.7%. Saks (NYSE:SKS) joined Macy's in positive territory, with a 3.2% increase. It's clear that Macy's is holding its own and is poised for a sustained improvement this year.

Macy's Stock
The retailer has turned around its business, and with earnings guidance of $1.75 to $1.80 a share for fiscal 2010, its performance has been noticed by investors. The stock was recently trading at $24.21 a share, close to its 52-week high of $25.25, before falling back to $23.50 on Thursday. If the projected earnings hold up, the PE at around 14.5 is not excessive. It would of course be better to get the stock at a bargain price, so you might want to wait for another spasm in the market like we had last week to consider getting into these shares. But Macy's looks to be a company pointed in the right direction for the long haul. (To learn more, see Analyzing Retail Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  2. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  3. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  4. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  5. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  10. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center