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Macy's in 'Right Place at the Right Time': Pro

Macy's Q4 Results Beat Expectations
Macy's Q4 Results Beat Expectations

Despite smaller paychecks for consumers due to the payroll tax hike, department store chain Macy's has been able to offset any potential impact from the increase, one analyst told CNBC on Tuesday.

"Listen, I think it's a choppy background," said Matthew Boss, a retail analyst at JPMorgan. "I think that the consumer is stretched today, but I think Macy's is in the right place at the right time. The reason I say that is I think they have company-specific initiatives and drivers that are setting them apart."

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While Boss told CNBC's "Squawk Box" that the payroll tax is not necessarily having an impact, he thinks the company is able to offset it with their initiatives.

To increase its selling efficiency, Macy's has invested heavily in its "omnichannel initiative," which integrates about 300 of its stores to help complete online orders. The company has also worked to increase the localization of its stores offerings and broaden its customer base.

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"I think Macy's is one of the few retailers that both has the high-end demographic as well as the low income very comfortable in their stores," Boss added. "They offer the right product at the right prices, and again I think that's the powerful combination that they have that a lot of their competitors don't today."

Its e-commerce initiatives appear to be paying off. During the quarter, online sales shot up 47.7 percent compared to the year-ago quarter. Overall, same-store sales increased 3.9 percent during the period. The company edged above Wall Street's earnings and revenue estimates.

Moving forward, Macy's said it expects same-store sales to increase approximately 3.5 percent during the year. It guided for earnings of $3.90 to $3.95 a share during the full-year, which was better than the $3.81 per share that analysts had expected, according to a consensus estimate from Thomson Reuters.

In a note issued on Tuesday following the earnings report, JPMorgan analysts said they see "Macy's as a core portfolio holding and multi-year 'compounding' story with levers in place to deliver consistent mid-teens earnings per share growth through FY15." Analysts also reiterated an "overweight" rating on Macy's stock.

"We think that given the guidance that they just outlined this morning, which historically is more on the conservative side, we think it continues for the next two to three years at least, which a compounding story like that is very powerful in this backdrop," Boss said.

With a $46 price target, JPMorgan sees about 16 percent potential upside to Macy's stock price from current levels.

—By's Katie Little; Follow on Twitter @Katie_Little_

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Matthew Boss does not own Macy's stock.