Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Macy’s, Inc. (M), Nordstrom, Inc. (JWN): Earnings Misses Create Buying Opportunities in These Retailers

Last week, department store operators Macy’s, Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN) reported disappointing sales and earnings results for the recently ended second quarter. Furthermore, both companies lowered guidance for the full year. Macy’s, Inc. (NYSE:M) cut its fiscal year 2013 EPS guidance from a $3.90-$3.95 range to a $3.80-$3.90 range, while Nordstrom, Inc. (NYSE:JWN) reduced its fiscal year 2013 EPS guidance from a $3.65-$3.80 range to a $3.60-$3.70 range.

Macy's, Inc. (NYSE:M)The weaker-than-expected results at Macy’s, Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN) demonstrate that neither retailer is immune to the sluggish consumer spending environment. That said, both are high-quality companies with strong customer loyalty and good long-term momentum.

JWN Chart

Macy’s vs. Nordstrom 1-Year Price Chart, data by YCharts.

As the chart shows, both stocks have experienced significant declines recently, due in part to their weak earnings. This has created good entry points for investors looking to take advantage of the long-term potential of these two businesses.

Macy’s hits a bump
Macy’s, Inc. (NYSE:M) has experienced a strong and steady recovery since the Great Recession. Same-store sales grew 4.6% in fiscal year 2010, 5.3% in 2011, and 3.7% in 2012. Macy’s, Inc. (NYSE:M) also achieved a same-store sales increase of nearly 4% in the first quarter this year. However, both total sales and same-store sales were down 0.8% in the second quarter.

On Macy’s, Inc. (NYSE:M) earnings call, CFO Karen Hoguet attributed last quarter’s weak sales to several factors. First, hot weather arrived late in much of the country, hurting sales of seasonal merchandise. Second, many consumers appear to be prioritizing capital purchases such as autos and housing over other discretionary spending this year. Third, Macy’s underemphasized “value” in its marketing messages during the second quarter.

None of the factors that dragged Macy’s down this quarter are “permanent.” Obviously, weather is unpredictable but not a real “threat” to the business, while consumer spending is likely to improve over time as the economy continues to recover. More important, Macy’s has addressed its messaging problem by refocusing on value both in its marketing and on the selling floor. Overall, Macy’s continues to operate a very healthy business.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.