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Macy’s (M - Free Report) has been struggling to find its footing for years following the explosion of e-commerce options, and it doesn’t look like it will be improving any time soon.
The top and bottom lines of the struggling retailer have experienced YoY declines in the trailing twelve months, and both are nearly flat over the last decade.
While Macy’s is currently trading near its cheapest valuation in more than 10 years, a Zacks Rank #5 (Strong Sell), reflecting falling earnings estimates, and an unclear path forward make it a stock investors should avoid.
Image Source: Zacks Investment Research
Plummeting Earnings Estimates
While M battles to remain relevant in a rapidly shifting retail environment, it also faces macro headwinds adding to an even more grim setup. Waning consumer confidence and a pull back in household spending have led analysts to further downgrade sales and earnings expectations.
Current quarter earnings estimates have been cut by a brutal -84% over the last two months and are expected to fall -88% YoY. FY23 earnings expectations have been downgraded by -21.6% and are forecast to decline -35% YoY.
Current quarter sales are projected to fall -9.3% YoY and FY23 sales are set to decline 6% YoY.
Image Source: Zacks Investment Research
Valuation
Macy’s is trading at a one-year forward earnings multiple of 5.4x, which is below the industry average of 7.6x, and below its 10-year median of 8.5x. While this does present a considerable historical discount, the business faces a tremendous uphill battle to growing sales and earnings.
Image Source: Zacks Investment Research
Bottom Line
While Macy’s seem unable to end its slow demise, it isn’t from lack of trying. Its recent three-year makeover, called the Polaris strategy has created a number of innovations to better adapt to the changing retail landscape.
Backstage locations, Vendor Direct, Store Pickup and Loyalty Program as well as a focus on products where the business has a foothold like jewelry and fragrances are all attempt to gain momentum. However, trying isn’t enough and the retail sector continues to play catchup with the e-commerce industry.
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Bear of the Day: Macy's (M)
Macy’s (M - Free Report) has been struggling to find its footing for years following the explosion of e-commerce options, and it doesn’t look like it will be improving any time soon.
The top and bottom lines of the struggling retailer have experienced YoY declines in the trailing twelve months, and both are nearly flat over the last decade.
While Macy’s is currently trading near its cheapest valuation in more than 10 years, a Zacks Rank #5 (Strong Sell), reflecting falling earnings estimates, and an unclear path forward make it a stock investors should avoid.
Image Source: Zacks Investment Research
Plummeting Earnings Estimates
While M battles to remain relevant in a rapidly shifting retail environment, it also faces macro headwinds adding to an even more grim setup. Waning consumer confidence and a pull back in household spending have led analysts to further downgrade sales and earnings expectations.
Current quarter earnings estimates have been cut by a brutal -84% over the last two months and are expected to fall -88% YoY. FY23 earnings expectations have been downgraded by -21.6% and are forecast to decline -35% YoY.
Current quarter sales are projected to fall -9.3% YoY and FY23 sales are set to decline 6% YoY.
Image Source: Zacks Investment Research
Valuation
Macy’s is trading at a one-year forward earnings multiple of 5.4x, which is below the industry average of 7.6x, and below its 10-year median of 8.5x. While this does present a considerable historical discount, the business faces a tremendous uphill battle to growing sales and earnings.
Image Source: Zacks Investment Research
Bottom Line
While Macy’s seem unable to end its slow demise, it isn’t from lack of trying. Its recent three-year makeover, called the Polaris strategy has created a number of innovations to better adapt to the changing retail landscape.
Backstage locations, Vendor Direct, Store Pickup and Loyalty Program as well as a focus on products where the business has a foothold like jewelry and fragrances are all attempt to gain momentum. However, trying isn’t enough and the retail sector continues to play catchup with the e-commerce industry.