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Sometimes, a Beat Is Not Enough

15 August 2018 by jbchevrel

Macy’s (FD) raised its full-year EPS guidance (mid-point $4.05 from $3.85) and beat the analysts’ consensus on top line ($5.57B vs $5.55B est). However, the stock is trading down 14% and the 5y CDS is wider +13bp (worst performer in the CDX IG index, so far today). The beat was mainly driven by asset sales, credit revenue and taxes. But as far as its core business is concerned, Macy's is still struggling to increase sales as foot traffic dwindles at malls. Retailers must now compete with Amazon's powerful e-commerce platform. And that is in the context of strong consumer spending, helped by the tax reform and the strong employment growth. Elsewhere spreads widened (Main +2.5 CDXIG +1.5) led by the decline in stocks (SX5E -1.5% SPX -1.2%). Tech and commodity sectors were particularly under pressure, following Tencent’s bad results and oil/metals dips respectively. CDX IG (finally) broke above 63, with decent volumes exchanged (>$11B as I write, according to OTCStreaming).