No-Moat Macy’s Succession Plan Should Not Alter Strategy; Shares Very Undervalued

Macy’s announced that Jeff Gennette will retire as CEO next February and be replaced by Tony Spring, the current CEO of Bloomingdale’s. Also, Chief Financial Officer Adrian Mitchell has added the chief operating officer title and taken on an expanded role in store, technology, and supply chain management. Spring’s elevation was likely boosted by Bloomingdale’s recent solid performance, while Mitchell has been involved with Macy’s Polaris plan since its early days. We do not expect the transition to bring about any significant shift in Polaris or Macy’s capital allocation plans, which include significant share repurchases ($600 million in 2022) and consistently rising dividends (current yield of 4%). Thus, we are maintaining our Standard capital allocation rating.