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Macy's Down 21% in 3 Months: Should Investors Still Hold M Stock?
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Macy's, Inc. (M - Free Report) , a prominent omnichannel retailer, has seen its stock price fall 20.5% over the past three months. This decline can be due to a tougher promotional environment and ongoing pressures on discretionary spending. Investors are currently divided on whether the stock is set for further decline or if a recovery is imminent.
The underperformance between Macy's and that of its peers is evident when comparing it to the Zacks Retail – Regional Department Stores industry, which saw a decline of 15.3% during the same period. Moreover, the Zacks Retail-Wholesale sector and the S&P 500 Index increased by 6.8% and 4%, respectively. Macy’s close competitors, Costco Wholesale Corporation (COST - Free Report) , Nordstrom Inc. (JWN - Free Report) and Walmart Inc. (WMT - Free Report) have advanced 6.8%, 7.2% and 19.9%, respectively, in the same timeframe.
Image Source: Zacks Investment Research
Currently trading well below its 52-week high of $22.10 achieved on March 19, 2024, Macy's market value has diminished within a relatively brief timeframe. As of yesterday, the stock closed at $14.86, marking a decline of approximately 32.8% from its highest point in the past year.
Moreover, Macy’s stock has fallen below critical technical thresholds, including its 200 and 50-day moving averages of $17.99 and $15.66, respectively. This moving average is an important indicator for gauging market trends and momentum. The breach of this threshold heightens investor concerns about the stock’s short-term outlook and signals the potential for further downside if these levels are not reclaimed.
Image Source: Zacks Investment Research
M Faces Headwinds Amid Changing Consumer Spending Patterns
Macy’s is contending with significant headwinds as consumer spending shifts toward non-discretionary items. This shift, driven by economic pressures and changing priorities, threatens the company’s ability to maintain sales momentum and customer loyalty.
The trend was evident in the second quarter of fiscal 2024, where Macy’s reported a year-over-year decline in comparable sales, down 4% on an owned basis and 3.3% on an owned-plus-licensed-plus-marketplace basis. As consumers prioritize essentials, Macy’s must continuously adapt its product offerings to align with evolving preferences.
Looking ahead, Macy’s has revised its annual outlook, reflecting more cautious consumer behavior and a competitive promotional landscape. The company now anticipates a 0.5-2% decline in comparable owned-plus-licensed-plus-marketplace sales, a downward adjustment from its previous guidance, which ranged from a 1% decline to a 1.5% increase.
Net sales are also expected to fall slightly, with projections between $22.1 billion and $22.4 billion for fiscal 2024 compared with $23.1 billion in fiscal 2023. Macy’s reliance on discretionary spending means that continued inflationary pressures could further hamper revenue growth.
In addition, operational challenges are mounting, particularly in controlling selling, general, and administrative (SG&A) expenses. Macy’s expects SG&A costs to rise as a percentage of net sales to between 36.3% and 36.6% in fiscal 2024, up from 35.1% in the prior year. This increase reflects higher relative operational costs, putting pressure on margins. Despite efforts to manage expenses, the rising SG&A percentage suggests that cost-saving measures are not enough to offset declining revenues.
Macy’s also continues to face weakness in key product categories, particularly men’s apparel, handbags and home goods. These categories are vital to its overall business and their performance highlights the company’s struggle to adapt to shifting consumer preferences. Without improvement in these areas, Macy’s risks further underperformance compared to competitors, which could lead to continued declines in sales and profitability. The company’s future success hinges on its ability to navigate these challenges and respond effectively to the changing retail landscape.
Macy's Modernization: Building Blocks for the Future
Macy's stock has faced headwinds over the past three months, but the company is focusing on modernizing its operations and leveraging technology, including artificial intelligence, to streamline its supply chain and improve inventory management. These initiatives aim to boost efficiency and meet market demands, supporting sustainable growth. By prioritizing margin and expense management, Macy's has seen success, with a 240 basis point gross margin expansion in the fiscal second quarter, driven by better inventory management and a shift toward full-price selling.
As part of its "Bold New Chapter" strategy, Macy's is driving long-term growth by focusing on strengthening its brand, expanding into luxury and optimizing operations. The closure and monetization of 55 underperforming stores in 2024 reflects effective portfolio management, allowing Macy's to focus on more successful locations. Initiatives like the First 50 Stores have outperformed through better customer experience, contributing to overall profitability.
Macy's is heavily investing in digital and omnichannel enhancements, such as improving mobile experiences and optimizing its online presence. These efforts are crucial as shopping trends shift toward online and omnichannel platforms. Macy's also focuses on improving in-store experiences, which has boosted sales in key categories. The success of its First 50 stores is paving the way for similar upgrades across more locations, further driving customer engagement and store traffic.
Unlocking Value of Macy’s Stock
Although Macy’s stock is currently trading at a discount compared to its industry peers, this valuation disparity might not be as favorable as it seems. The lower price could be indicative of underlying issues rather than representing a clear investment opportunity.
Macy’s is currently trading at a discount to its historical and industry benchmarks. The stock has a forward 12-month P/E ratio of 5.55, which is below the median level of 6.77 scaled in the past year. This compares to the forward 12-month P/E ratio of 8.80 for the industry.
Image Source: Zacks Investment Research
How Are Macy's Earnings Estimates Faring?
Analysts seem to be cautious about Macy's performance, as evident from downward revisions in the Zacks Consensus Estimate for earnings per share. In the past 60 days, analysts have decreased their estimates for the current fiscal year by 7 cents. The consensus estimate is pegged at $2.72 per share. The estimate for the next fiscal year has also been reduced by 15 cents to $2.65 per share.
Image Source: Zacks Investment Research
Investor Guidance
Investors should approach Macy's with caution due to the various challenges the company is facing. The retailer is grappling with significant pressures from a changing consumer spending landscape, where discretionary purchases are declining in favor of essential items. This shift, combined with rising operational costs and weakening performance in key product categories, raises concerns about Macy's ability to sustain sales and profitability. Furthermore, the stock's recent underperformance compared to its peers highlights a potential lack of investor confidence, suggesting that further declines could be imminent. Given these factors, a careful assessment is essential before considering an investment in Macy's. Currently, Macy’s stock carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Macy's Down 21% in 3 Months: Should Investors Still Hold M Stock?
Macy's, Inc. (M - Free Report) , a prominent omnichannel retailer, has seen its stock price fall 20.5% over the past three months. This decline can be due to a tougher promotional environment and ongoing pressures on discretionary spending. Investors are currently divided on whether the stock is set for further decline or if a recovery is imminent.
The underperformance between Macy's and that of its peers is evident when comparing it to the Zacks Retail – Regional Department Stores industry, which saw a decline of 15.3% during the same period. Moreover, the Zacks Retail-Wholesale sector and the S&P 500 Index increased by 6.8% and 4%, respectively. Macy’s close competitors, Costco Wholesale Corporation (COST - Free Report) , Nordstrom Inc. (JWN - Free Report) and Walmart Inc. (WMT - Free Report) have advanced 6.8%, 7.2% and 19.9%, respectively, in the same timeframe.
Image Source: Zacks Investment Research
Currently trading well below its 52-week high of $22.10 achieved on March 19, 2024, Macy's market value has diminished within a relatively brief timeframe. As of yesterday, the stock closed at $14.86, marking a decline of approximately 32.8% from its highest point in the past year.
Moreover, Macy’s stock has fallen below critical technical thresholds, including its 200 and 50-day moving averages of $17.99 and $15.66, respectively. This moving average is an important indicator for gauging market trends and momentum. The breach of this threshold heightens investor concerns about the stock’s short-term outlook and signals the potential for further downside if these levels are not reclaimed.
Image Source: Zacks Investment Research
M Faces Headwinds Amid Changing Consumer Spending Patterns
Macy’s is contending with significant headwinds as consumer spending shifts toward non-discretionary items. This shift, driven by economic pressures and changing priorities, threatens the company’s ability to maintain sales momentum and customer loyalty.
The trend was evident in the second quarter of fiscal 2024, where Macy’s reported a year-over-year decline in comparable sales, down 4% on an owned basis and 3.3% on an owned-plus-licensed-plus-marketplace basis. As consumers prioritize essentials, Macy’s must continuously adapt its product offerings to align with evolving preferences.
Looking ahead, Macy’s has revised its annual outlook, reflecting more cautious consumer behavior and a competitive promotional landscape. The company now anticipates a 0.5-2% decline in comparable owned-plus-licensed-plus-marketplace sales, a downward adjustment from its previous guidance, which ranged from a 1% decline to a 1.5% increase.
Net sales are also expected to fall slightly, with projections between $22.1 billion and $22.4 billion for fiscal 2024 compared with $23.1 billion in fiscal 2023. Macy’s reliance on discretionary spending means that continued inflationary pressures could further hamper revenue growth.
In addition, operational challenges are mounting, particularly in controlling selling, general, and administrative (SG&A) expenses. Macy’s expects SG&A costs to rise as a percentage of net sales to between 36.3% and 36.6% in fiscal 2024, up from 35.1% in the prior year. This increase reflects higher relative operational costs, putting pressure on margins. Despite efforts to manage expenses, the rising SG&A percentage suggests that cost-saving measures are not enough to offset declining revenues.
Macy’s also continues to face weakness in key product categories, particularly men’s apparel, handbags and home goods. These categories are vital to its overall business and their performance highlights the company’s struggle to adapt to shifting consumer preferences. Without improvement in these areas, Macy’s risks further underperformance compared to competitors, which could lead to continued declines in sales and profitability. The company’s future success hinges on its ability to navigate these challenges and respond effectively to the changing retail landscape.
Macy's Modernization: Building Blocks for the Future
Macy's stock has faced headwinds over the past three months, but the company is focusing on modernizing its operations and leveraging technology, including artificial intelligence, to streamline its supply chain and improve inventory management. These initiatives aim to boost efficiency and meet market demands, supporting sustainable growth. By prioritizing margin and expense management, Macy's has seen success, with a 240 basis point gross margin expansion in the fiscal second quarter, driven by better inventory management and a shift toward full-price selling.
As part of its "Bold New Chapter" strategy, Macy's is driving long-term growth by focusing on strengthening its brand, expanding into luxury and optimizing operations. The closure and monetization of 55 underperforming stores in 2024 reflects effective portfolio management, allowing Macy's to focus on more successful locations. Initiatives like the First 50 Stores have outperformed through better customer experience, contributing to overall profitability.
Macy's is heavily investing in digital and omnichannel enhancements, such as improving mobile experiences and optimizing its online presence. These efforts are crucial as shopping trends shift toward online and omnichannel platforms. Macy's also focuses on improving in-store experiences, which has boosted sales in key categories. The success of its First 50 stores is paving the way for similar upgrades across more locations, further driving customer engagement and store traffic.
Unlocking Value of Macy’s Stock
Although Macy’s stock is currently trading at a discount compared to its industry peers, this valuation disparity might not be as favorable as it seems. The lower price could be indicative of underlying issues rather than representing a clear investment opportunity.
Macy’s is currently trading at a discount to its historical and industry benchmarks. The stock has a forward 12-month P/E ratio of 5.55, which is below the median level of 6.77 scaled in the past year. This compares to the forward 12-month P/E ratio of 8.80 for the industry.
Image Source: Zacks Investment Research
How Are Macy's Earnings Estimates Faring?
Analysts seem to be cautious about Macy's performance, as evident from downward revisions in the Zacks Consensus Estimate for earnings per share. In the past 60 days, analysts have decreased their estimates for the current fiscal year by 7 cents. The consensus estimate is pegged at $2.72 per share. The estimate for the next fiscal year has also been reduced by 15 cents to $2.65 per share.
Image Source: Zacks Investment Research
Investor Guidance
Investors should approach Macy's with caution due to the various challenges the company is facing. The retailer is grappling with significant pressures from a changing consumer spending landscape, where discretionary purchases are declining in favor of essential items. This shift, combined with rising operational costs and weakening performance in key product categories, raises concerns about Macy's ability to sustain sales and profitability. Furthermore, the stock's recent underperformance compared to its peers highlights a potential lack of investor confidence, suggesting that further declines could be imminent. Given these factors, a careful assessment is essential before considering an investment in Macy's. Currently, Macy’s stock carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.