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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

No-Moat Macy’s Outperformed Low Expectations in Q3, but Holiday Concerns Remain; Shares Undervalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Despite a steep year-over-year decline in sales, no-moat Macy’s results for the third quarter of 2020 were slightly better than we had anticipated. The retailer reported a same-store sales decline of 21% on owned sales, 2 percentage points better than our negative 23% forecast. But Macy’s faces considerable uncertainty as it enters the critical final weeks of the holiday selling season due to the rising number of COVID-19 cases and the possibility of new restrictions on stores and malls. The firm did not provide specific guidance for the fourth quarter and does not intend to report holiday sales until it reports its year-end results. We do not expect to make any significant change to our per share fair value estimate of $16.30 and continue to view Macy’s as undervalued. While it has significant problems, we do not think Macy’s will fall into financial distress and believe it can return to profitability next year.

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Company Profile

Business Description

Founded in 1858, Macy’s operates about 600 stores under the Macy’s brand, 56 stores under the Bloomingdale’s brand, and about 170 freestanding Bluemercury specialty beauty stores. Macy’s also operates e-commerce sites, owns 65% of a Chinese e-commerce joint venture, and licenses two Bloomingdale’s stores in the United Arab Emirates and Kuwait. Women’s apparel, accessories, shoes, cosmetics, and fragrances constitute approximately 61% of Macy’s sales. The retailer recently consolidated its headquarters in New York City.

Contact
151 West 34th Street
New York, NY, 10001
T +1 212 494-1602
Sector Consumer Cyclical
Industry Department Stores
Most Recent Earnings Jul 31, 2020
Fiscal Year End Jan 30, 2021
Stock Type Distressed
Employees 123,000

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