Macy’s Earnings: Another Strategic Plan Is Unveiled, but Sales Growth Elusive; Shares Attractive

No-moat Macy’s issued mixed fourth-quarter results as margin outperformance made up for subpar sales. This report was overshadowed by new CEO Tony Spring’s announcement of a strategic plan, "A Bold New Chapter," that includes the planned closure of roughly 150 underperforming stores over the next three years. As discussed in our recent notes, Macy’s is facing a proxy battle that could result in the company going private. Despite all this change, we do not expect to make any material revision to our $25 fair value estimate, leaving shares slightly undervalued. Although Macy’s continues to struggle to move away from the broken department store model, we think it has strengths, including having more than 40 million annual customers, 30 million loyalty members, and more than $7 billion in annual digital sales.