Macy’s Is In Even More Trouble After Same Store Sales Drop 20%
In the last few months, I’ve written two separate articles telling you to avoid Macy’s stock at all costs.
Today, I give you an update to tell you why Macy’s Is In Even More Trouble….
You can read the full article above.
But if you don’t want to; here’s a quick recap of the last two articles on why I said you should avoid Macy’s.
From Article #1 Linked Above
Avoid Macy’s Stock
At least 125 store closures over the next three years.
Thousands of jobs cut.
A 1st quarter 2020 net loss of $3.6 billion.
A 1st quarter 2020 net loss per share of $11.53.
Impairment charges of $3.1 billion.
And the company pulling its earnings and revenue guidance for the rest of the year.
These are the lowlights of Macy’s latest earnings that came out on July 1st, 2020.
The earnings report was brutal for the retailer that’s been flailing for years now.
Macy’s stores were once one of the most recognized and admired retail brands in the world.
But from 2015 to today its fallen like a rock.
Macy’s stock hit its all-time high of $69.94 per share on July 24th. As of this writing its shares are selling at $6.38.
Since July 24th, 2015 to today on July 22nd, 2020 – or almost exactly 5 years later – its stocks fallen 90.9%.
At its height, the stock had a market cap of $24 billion.
Now it’s $1.98 billion.
This rapid fall is due to more people shopping online as the 2010’s progressed. And then accelerated in more recent years as companies like Amazon allowed people to buy stuff from home and have it delivered to their houses within days.
All without leaving your home, dealing with traffic, dealing with rude employees, dealing with other rude customers, and all the other negatives that come with shopping in stores.
In time its stock is likely to go to $0 if it’s not bought out or taken private before its inevitable bankruptcy.
This trend has been building for years and is known as the “Retail Apocalypse.”
The Retail Apocalypse is former great retailers like Sears, JC Penney, Macy’s, Bed Bath & Beyond and others losing out to people shopping online and collapsing.
It’s impossible to give you exact stats on the following due to the slow decline of individual companies in the retail industry.
But millions of jobs have been lost to this trend already. And thousands if not tens of thousands of stores have closed nationwide.
And it’s only going to continue with the rise of people shopping and then getting things delivered directly to their houses.
This has been going on for years… But retail store closures due to the coronavirus is accelerating this.
Since the start of the coronavirus pandemic in March the following retailers declared bankruptcy.
- JC Penney
- Brooks Brothers
- Lucky Brands
- J. Crew
- Neiman Marcus
And according to reports many other retailers are preparing to file for bankruptcy.
Including Macy’s as recently as early June 2020 when it narrowly avoided bankruptcy by taking on an added $4.5 billion worth of debt.
A few retails stores like Bed Bath & Beyond and Macy’s are hanging on as best they can by laying off employees and closing stores to conserve on costs.
But it won’t work.
Normally in these articles I show you profitability metrics, valuations, and more.
But frankly none of those matter in this case.
Macy’s continued decline into bankruptcy is inevitable.
Stay away from owning its stock.
From Article #2 Linked Above
This thesis of Macy’s continuing to flounder proved out on September 2nd, 2020 when it released its most up to date financial info.
- Revenue fell 35.7% to $3.6 billion in the 2nd quarter of 2020 compared to $5.6 billion in the 2nd quarter of 2019.
- Operating income fell to negative $631 million in the 2nd quarter of 2020 compared to positive $155 million in the 2nd quarter of 2019.
- Net income fell to negative $431 million in the 2nd quarter of 2020 compared to positive $86 million in the 2nd quarter of 2019.
- And it lost about $3.5 billion worth of book value – underlying base value of the company – since February 1st, 2020.
And yet the share price of its stock is up since I last told you about Macy’s on July 23rd, 2020.
From $6.38 per share to $7.16 per share as of this writing. Or an increase of 12.3% in a month and a half.
In other words, the economics of Macy’s have continued to deteriorate, and the underlying value of the company is down by $3.5 billion… But the value of the stock went up.
It makes no sense… Until you realize that people are speculating in the stock because Macy’s produced “higher than expected online sales in the quarter.”
Over the long-term Macy’s is still either going to zero or being taken private at a massive discount to its past value due to the Retail Apocalypse mentioned further above…
Unless it massively transforms its entire business… And I see this as highly unlikely because most business transformations fail.
Because Macy’s is still likely destined to go to zero, continue avoiding its stock… Even though its shares are up since I last wrote about it.
And unfortunately, things have continued to deteriorate for Macy’s since I last wrote you about them in early September.
On November 19th, 2020 Macy’s reported its latest quarterly earnings… And while most of the numbers were as analysts expected. These numbers were still bad.
Same store sales dropped 20% in the quarter.
Which caused an overall 22.8% drop in sales to $3.99 billion.
And with Covid cases surging nationwide leading to more lockdowns… Things are about to get even worse for Macy’s as the high spending holiday season approaches.
During the first set of lockdowns Macy’s had an operating loss of $4 billion in the 1st quarter of 2020. This led Macy’s to hire a law firm to advise whether it should file for bankruptcy or not.
It didn’t last time… But if lockdowns are severe – this time it might.
Because of this enormous risk… Continue avoiding Macy’s stock. Because unfortunately things look like they’re about to get far worse for the once great company.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.