11:08 AM EDT, 08/22/2024 (MT Newswires) -- Macy's (M) delivered "lower-quality" fiscal Q2 earnings even though results beat consensus estimates with the fiscal year outlook reiterated, Morgan Stanley said Wednesday in a report.

Results may have diminished market conviction in the retailer's strategy execution, and that may remain the case until around mid-2025, Morgan Stanley said.

While management "continues to successfully control the controllables," disappointing Q2 sales and the fiscal year revenue and gross margin guidance cut "underscore challenged fundamentals," the report said.

Also, H2 trends may worsen with the "potential non-go-forward Macy's store performance degradation on lack of investment" in addition to "seemingly bloated inventory levels" exiting Q3 and the "challenging" retail backdrop, the report said.

Morgan Stanley trimmed Macy's price target to $17 from $18, while keeping its equalweight rating on the stock.

Shares of Macy's rose 1.1% in recent trading Thursday.

Price: 15.61, Change: +0.16, Percent Change: +1.07