The Zacks Analyst Blog Highlights:Macy's, J. C. Penney, Dillard's, Saks and Alcoa

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Aug 06, 2012, 10:39 ET

CHICAGO, Aug. 6, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Macy's Inc. (NYSE:M), J. C. Penney Company Inc. (NYSE:JCP), Dillard's Inc. (NYSE:DDS), Saks Incorporated (NYSE:SKS) and Alcoa Inc. (NYSE:AA).

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Here are highlights from Friday's Analyst Blog:

Macy's Keeps Up Momentum

Macy's Inc. (NYSE:M), one of the leading department store retailers in the U.S., posted strong comparable-store sales (comps) for the four-week period ended July 28, 2012, much better than analysts' expectations. The increase in comps was attributable to continued strength in its online business.

Same-store sales improved 4.1% year over year for the month of July. The company stated that total sales of $1.69 billion for the month of July 2012 reflected an increase of 5.1% from $1.61 billion in the comparable prior-year period.

In spite of the macro-economic headwinds and a temporary suspension in sales due to restoration of flagship stores in New York City, the company continued to perform well in the first half of 2012, reflecting healthy sales in the month of July. Moreover, Macy's met management's expectations for the spring season.

Year-to-date, Macy's sales jumped 3.7% to $12.3 billion compared with $11.8 billion in the same period last year. Macy's same-store sales also increased 3.7% year-to-date.

Online sales, which include sales from macys.com and bloomingdales.com, continued to grow at a rapid pace, surging 35.1% in July. On a year-to-date basis, online sales shot up 34.8% from the comparable period last year. The company seeks to expand both Macy's and Bloomingdale's brands online.

Macy's total sales grew 3% to $6.1 billion in the second-quarter 2012 from $5.9 billion in the prior-year period, while same-store sales climbed 3%. Online sales during the quarter soared 36.1%. The company currently operates approximately 840 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

To Conclude

Macy's department stores sell a wide range of merchandise. Its products include men's, women's, and children's apparel. It also deals with accessories, cosmetics, home furnishings and other consumer goods.

The company has been taking a number of initiatives in order to increase its sales, profitability and cash flows. These steps include integration of operations, consolidation of divisions as well as developing e-commerce business and online order fulfillment centers.

We remain optimistic about the company's customer-centric localization initiative called "My Macy's." The program aims at improving comparable-store sales and reducing operating expenses, with stores and merchandise assortments focusing on local customer needs and preferences.

However, the company's expansion in regions where it already serves could cannibalize its sales performance and bring down traffic counts at its existing stores in these areas. Consequently, this may have a negative impact on the company's overall performance.

Therefore, Macy's, which competes with J. C. Penney Company Inc. (NYSE:JCP), Dillard's Inc.(NYSE:DDS) and Saks Incorporated (NYSE:SKS), carries a Zacks #3 Rank that translates into a short-term Hold rating. Moreover, we have a long-term Neutral recommendation on the stock.

Alcoa Clinches Drill Pipe Contract

Aluminum heavyweight Alcoa Inc. (NYSE:AA) has sealed a major contract from oil and gas exploration company Pennsylvania General Energy ("PGE"). Under the pact, the company will produce and supply 3,500 feet of aluminum alloy drill pipe to PGE for gas drilling in the Marcellus Shale formation of Pennsylvania. PGE was among the first companies to explore and drill a well in the region, in 2005.

Alcoa noted that its 4.5 inch drill pipe will extend the reach of the drilling rig on natural gas well in the Marcellus Shale to roughly 7,500 feet, which is 1,000 feet deeper than commonly used steel drill pipe can penetrate without using larger, more expensive rigs. The financial terms of the deal, however, were undisclosed.

The novel drill pipe is a tapered, high-strength, aluminum alloy tube powered by the company's proprietary thermal connection technology, which enables tool joints to attach to the aluminum pipe. This increases the pipe's strength-to-weight ratio and allows it to be used with steel pipe.

The drill pipe's high strength-to-weight ratio will enable PGE to drill deeper with less energy and increase operating efficiency. The unique design and construction of Alcoa's pipe makes it up to 50% lighter than conventional steel pipe while maintaining the durability and strength of steel. The deal underscores the growing traction of aluminum as a replacement for steel.

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