UPDATE 1-Citigroup raises Macy's to buy on top-line potential
Sept 22 (Reuters) - Citigroup upgraded Macy's Inc (M.N: Cotización) to "buy" from "hold," citing increased conviction in the department store operator's top-line and margin potential.
The company's localization initiative should lead to improved top-line and margin trends ahead, particularly beginning in 2010, analyst Deborah Weinswig said in a note to clients.
"We are encouraged by the consistent, positive early results that Macy's has reported from its 20 pilot markets since the fourth quarter of 2008," Weinswig said.
The company launched its "My Macy's" strategy last year to tailor product offerings to local markets.
Macy's expects the benefit from product cost deflation to be greater in 2010 than in 2009, the analyst said.
Weinswig, who raised her price target on Macy's stock to $30 from $15, said product cost deflation could boost the company's gross margins by 50 basis points next year.
Macy's shares closed at $17.79 Monday on the New York Stock Exchange. (Reporting by Vidya Lakshmi in Bangalore; Editing by Anne Pallivathuckal)
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