What Happened?

Shares of department store chain Macy’s (NYSE:M) fell 11.1% in the morning session after the company reported underwhelming third-quarter results. Its full-year gross margin, EBITDA margin, and EPS guidance were all lowered, with EPS guidance missing significantly. Lower gross margin expectations could be a signal that the company is facing more competition, discounting more of its products to move it, or is experiencing higher rates from suppliers. 

On the other hand, same-store sales, revenue, and EPS outperformed in the quarter. Overall, the quarter was fine, but the guidance is concerning and seems to be driving down shares.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Macy's? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Macy’s shares are quite volatile and have had 15 moves greater than 5% over the last year. But moves this big are rare even for Macy's and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 16 days ago when the stock dropped 7.3% after the company delayed its third-quarter 2024 earnings release and conference call. This is typically not a good sign as it raises uncertainty, which markets generally dislike. The delay is to allow time for the completion of an independent investigation in relation to an accounting error uncovered while preparing its financial statements. The company also reported underwhelming preliminary third quarter results with net and comparable sales down 2.4% year on year.

Macy's is down 19.6% since the beginning of the year, and at $15.90 per share, it is trading 26.2% below its 52-week high of $21.54 from March 2024. Investors who bought $1,000 worth of Macy’s shares 5 years ago would now be looking at an investment worth $1,012.

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