Macy's, Inc.

 M Details
Recent Partnership with SoGal Ventures:Macy’s, Inc. (NYSE: M) is one of the top retailers in the United States, with ~680 department stores and ~190 speciality stores across 43 states, the District of Columbia, Guam and Puerto Rico. Its key brands include Macy’s, Bloomingdale’s and Bluemercury.
 
Appointment of Vice President: Macy’s, Inc. has recently appointed Torrence Boone to its Board of Directors, effective 12 from December 2019.He is currently serving as the Vice President, Global Client Partnerships at Google. Boone will bring his extensive experience in advertising, marketing and technology to the company, which will help increase the demand for the company’s products and solutions globally.
 
Other Recent Updates: On 5 December 2019, the company partnered with SoGal Ventures to unveil SoGifted, a female entrepreneur-focused gifts destination.The SoGifted shops will feature products and gifts such as Lovevery, toys designed for children, Neely & Chloe, fashion-forward accessories range, etc. The company also announced that Hal Lawtonhas resigned as the president of Macy’s brand business, effective from 6 December 2019. 
 
Third-Quarter Results for the Period Ended 2 November 2019: The company reported third quarter adjusted diluted earnings of 7 cents per share as compared to 27 cents reported in the year-ago quarter.The company’s net sales amounted to $5,173 million, down ~4.3% year over year. Comparable sales went down by 3.5% on an owned plus licensed basis and 3.9% on owned basis. Adjusted EBITDA during the quarter came in at $325 million, down ~20.1%. Cash and cash equivalents at the end of the quarter came in at $301 million. Long-term debt stood at $4,677 million. 
 

Financial Details (Source: Company Reports)
 
What to Expect: In FY19, the company anticipates net sales to witness a decline between 2% - 2.5%.The company expects adjusted diluted earnings to be in the range of $2.57 and $2.77 per share in FY19.
 
Valuation Methodology:Price to Cash Flow Multiple Approach

Price to Cash Flow Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months
Stock Recommendation: The stock is trading below the average of its 52-week high and low of $14.11 and $32.06, respectively. The company’s “Buy Online Pickup in Stores” and "Buy Online Ship to Store" programs are gaining traction. Also, the company has purchased a minority stake in b8ta, which should boost customer shopping capabilities. Considering the above factors, we have valued the stock using Price to Cash Flow based relative valuation method and arrived at a target price depicting double-digit upside (in % terms). Hence, we give a “Buy” rating on the stock at the market price of $15.18 per share, down by 3.37% on 13^th December 2019. 
 
 
M Daily Technical Chart (Source: Thomson Reuters) 
 
 

Walgreens Boots Alliance, Inc.

 

WBA Details
 
WBA Enters into a JV with McKesson Corporation:Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is the worldwide leader in retail and wholesale pharmacy and health and beauty products. On 12 December 2019, Walgreens Boots Alliance, Inc. and McKesson Corporation entered a joint venture (JV) agreement that will merge the companies’ pharmaceutical wholesale businesses in Germany.  As per the deal, WBA will have a 70% controlling equity interest, while McKesson will have the rest 30%.
 
Modest Fourth-Quarter Fiscal 2019 Results for the Period Ended 31 August 2019: The company reported adjusted earnings of $1.43 per share, a decline of 3.7% year over year. The company’s total sales stood at $33.95 billion, an increase of 1.5% year over year. Gross profit during the quarter came in at $7.23 billion, down 4.6% year over year. Selling, general & administrative expenses came in at $6.4 billion, up 2.9%. Cash and cash equivalents at the end of FY2019 came in at $1.02 billion, up from $785 million at the end of fiscal 2018. Long-term debt stood at $11.09 billion. 
 
 
 

Financial Details (Source: Company Reports)
 
Segment Details:Sales from Retail Pharmacy USA increased 2.1% year over year. Retail Pharmacy International division revenues during the quarter declined 6.3% on a year-over-year basis. Revenues from the Pharmaceutical Wholesale division increased 3.1% year over year.
 
Outlook: Adjusted earnings per share in FY2020 is expected to be in the range of plus or minus 3%.
 
Valuation Methodology:Price to Earnings Multiple Approach

Price to Earnings Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months.

Stock Recommendation: The stock is trading below the average of its 52-week high and low of $49.03 and $83.14, respectively. In the third quarter, the company’s top-line increased on a year over year basis. Overall, the Retail Pharmacy USA division saw growth during the quarter, primarily on the back of robust retail prescription market. Moreover, the company is conducting necessary measures to hasten the initiatives of digitalization and transformation of its business. Considering the above factors, we have valued the stock using Price to Earnings based relative valuation method and arrived at a target price depicting lower single-digit upside. Hence, we recommend a “Buy” rating on the stock at the closing price of $57.88 per share, down by 1.19% on 13^th December 2019. 

 
WBA Daily Technical Chart (Source: Thomson Reuters)

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