Potential for improved margins and the early success of Macy's Inc.'s "My Macy's" program prompted a Citi Investment Research analyst to upgrade the department store operator to "Buy" from "Hold" on Tuesday.
The company's stock surged 96 cents, or 5.4 percent, to $18.75 in early morning trading. The shares have traded in a range of $5.07 to $19.82 over the past year.
Analyst Deborah Weinswig said in a client note that the Cincinnati-based chain anticipates that product cost deflation will be bigger next year than now, which Weinswig predicts could lift gross margins by a considerable amount.
The analyst is also optimistic about the company's "My Macy's" program started late last year, which has localized offerings at certain stores.
"We are encouraged by the consistent, positive early results that Macy's has reported from its 20 pilot 'My Macy's' markets, and believe that this localization initiative should lead to improved topline (as well as margin) trends ahead, particularly beginning in 2010," Weinswig wrote.
The analyst increased Macy's price target to $30 from $15.