Headquartered in New York, Macy’s Inc. (M) is one of the nation’s premier omni-channel fashion retailers, operating through its stores, websites, and mobile applications. The company sells a range of merchandise, including apparel and accessories for men, women, and children, cosmetics, home furnishings, and other consumer goods. M operates primarily through its three retail brands — Macy’s, Bloomingdale’s and Bluemercury.

The stock has been on a steep downtrend over the past couple of years as consumers have slowly but surely increasingly favored online retailers. Amid this intensifying competition, M has declined 31.9% since hitting its 52-week high on January 8.

Even though the company’s digital sales grew in the last-reported quarter, its weak fundamentals and uncertainty about its potential to rebound  based on several factors have led our proprietary rating system to rate the stock as “Neutral.”

Here is how our proprietary POWR Ratings system evaluates M:

Trade Grade: C

M is currently trading slightly above its 50-day and 200-day moving averages of $10.20 and $7.49, respectively. This indicates an uptrend. Moreover, M has gained 17.8% over the past month. However, the company’s results for its  last reported quarter do not  look promising.

The company’s net sales for the third quarter ended October 31, 2020 have declined 22.9% year-over-year to $4 billion. Its digital sales have increased 27% year-over-year. However, comparable sales were down 21% on an owned basis and down 20.2% on an owned-plus- licensed basis. Moreover, M reported an operating loss and net loss of $127 million and $91 million, respectively.

On December 15, the company announced several deals to attract last-minute shoppers. M offered same-day delivery through DoorDash Inc. (DASH) until December 23, and contactless curbside pick-up until December 24. The company announced on November 23, that it has named Malek Robert Amirshahi as senior vice president for its corporate communications. Also in late October, M announced its collaboration with the Culpo sisters — Olivia Culpo, Aurora Culpo, and Sophia Culpo —  on an exclusive ready-to-wear collection, Culpos X INC International Concepts.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, M is positioned unfavorably. The stock is currently trading 35.2% below its 52-week high of $18.57.

Over the past three years, the company’s revenue has declined at a CAGR of 8% due to its weak financials and stiff competition from its peers. M’s EBITDA  also declined at a CAGR of 79.8% during that period.

Peer Grade: D

M is currently ranked #36  of 66 stocks in the Fashion & Luxury industry. Other popular stocks in the fashion & luxury group are Estee Lauder Companies, Inc. (EL), Crocs, Inc. (CROX), and lululemon athletica inc. (LULU).

These industry participants have comfortably beaten M over the past year. EL, CROX, and LULU have gained 27.2%, 50.8%, and 52%, respectively, over this period, versus M’s 28.3% decline.

Industry Rank: B

The Fashion & Luxury industry is ranked #38 of the 123 StockNews.com industries. Since COVID-19  struck the whole world, people have been spending more time at home. So, retailers have had to come up with innovative ways to connect with their markets with the help of advanced technology.

Companies in this industry have been increasingly emphasizing on their online platforms. Although the way these companies operate is expected to change versus the pre-pandemic MO, the industry is expected to perform well as the economy gradually recovers.

Overall POWR Rating: C (Neutral)

Despite reporting digital sales growth in its last reported quarter, M is rated “Neutral” due to its weakening fundamentals and stiff competition as determined by the four components of our POWR Rating.

Bottom Line

Despite expanding its fulfilment offerings — such as curbside pick-up, store pickup, and same-day delivery, M has lost 29.2% this year. Even if  demand  revives after the successful deployment of the coronavirus vaccine, consumers will have a wider range of shopping options from which to choose than before the public health crisis.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is not favorable for M. A consensus revenue estimate of $17.04 billion for 2021 represents  a 30.6% decline year-over-year. Its EPS is also expected to decline 200.7% in 2021.

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M shares were trading at $11.66 per share on Thursday morning, down $0.37 (-3.08%). Year-to-date, M has declined -28.57%, versus a 17.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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