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Whether Mr. Market Is Aware Macy's Is The 10th Largest U.S. E-Commerce Company

Jun. 02, 2020 10:45 AM ETMacy's, Inc. (M)CPPRQ, W196 Comments


  • According to eMarketer, Macy's is the tenth largest U.S. E-Commerce business.
  • Out of the Top Ten, only Macy's (42.7% short interest) and Wayfair (15.7%) are highly shorted.
  • I find it remarkable that the sell side says Macy's is a 'dying business' yet company has 1.1% E-Commerce Market Share. Can you 'cognitive dissonance'?
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Year to date through yesterday, June 1, 2020, my portfolio is down 1.40% (see Appendix). This marks a dramatic recovery from the depths of early April 2020 when I was down 44.4%. Despite this recovery, Macy's, Inc (NYSE:M) is by far my largest position (I currently own 6,000 shares with a cost basis of $10.93) and Macy's is one of my Fab 5 positions. That said, I haven't publicly written about three out of my Fab 5 ideas on the free site.

Candidly, Macy's has been a major drag on performance. Going forward, I will be more disciplined and adhere to a strict 15% maximum sizing rule for any individual equity. Clearly, I lacked the imagination to envision that the entire United States would shut down, in mid March 2020, all 'non essential' retail stores due to Covid-19. Call it a bit of Confirmation Bias or perhaps Deer in Headlights Syndrome. And yes, I do closely monitor the financial news and I saw the shutdown in Italy so I should have connected the dots. However, I was too impressed with Macy's strong Q4 2019 results, which led me to miss the forest for the trees.

Anyway, the old Courage and Conviction would have written at least five articles since my writing return (on April 5, 2020) as a way to justify how outsized a bet this is. Instead, I have evolved and feel really good about my Macy's thesis. In fact, I have only written one free site piece on Macy's since my return (It's Time For Jeff Gennette To Sell Herald Square).

In today's short and sweet piece, I write to share a few compelling charts that I put together. Incidentally, over the weekend, a friend pinged me to inform me that Barron's wrong a negative Macy's article (

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This article was written by

A career wanderer and journeyman, with a passion for deep value and contrarian investing. I spent five years on the buy side in investment grade bonds on a team that managed $50 billion of assets, 3.5 years as an energy credit analyst for an energy company, and had multiple stints in corporate finance, most recently as a strategic financial analyst. I have an undergraduate degree in Finance (UMass Amherst) and earned an MBA (Babson College).

I actively invest my own capital and for a few family members.

Favorite quotes:

“When you are inspired by some great purpose, some extraordinary project, all your thoughts break their bonds: Your mind transcends limitations, your consciousness expands in every direction, and you find yourself in a new, great and wonderful world. Dormant forces, faculties and talents become alive, and you discover yourself to be a greater person by far than you ever dreamed yourself to be.” (Author - Patanjali)

“Tentative efforts lead to tentative outcomes. Therefore, give yourself fully to your endeavors. Decide to construct your character through excellent actions and determine to pay the price of a worthy goal. The trials you encounter will introduce you to your strengths. Remain steadfast...and one day you will build something that endures: something worthy of your potential.” (Author - Epictetus)

"Hope sees the invisible, feels the intangible, and achieves the impossible." (Author - Unknown)

"When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left, and could say, 'I used everything you gave me." (Author - Erma Bombeck)

Analyst’s Disclosure: I am/we are long M. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (196)

Courage & Conviction Investing profile picture
@WYCO Researcher BTW - I returned 19.4% during the first half of 2020 (the account snapshot are listed so this isn't an excel spreadsheet ; )

Did you do better for your private partnership investors?

WYCO Researcher profile picture
We did very well-remember I am usually very negative on a number of companies and was short prior to the virus issue-expecting bankruptcies even without the virus issues. I am expecting even more BKs over the next few months.

We also do a lot of arbitrage trading. I never write about that and "pair" trading.

My worst trade over the last 2 years was GE-averaged down and when it went back up I sold part-I should have sold all-oh, well. I did very well in my PG&E shorts (PCG)-for a while I was down a massive amount of money as I kept shorting up to 23-my partners were "nervous" about the trade. I covered as it dropped and closed out the rest on "panic Monday" morning last fall during the wildfire. (None of the partners kept the profits on the PCG trades-we all thought it was unethical/immoral to keep profits on such a terrible situation. Each partner made much larger donations than normal last Christmas.)
Courage & Conviction Investing profile picture
@WYCO Researcher I'm glad you and your partners are redirecting your profit back into philanthropic causes ; )

BTW - how do I track monthly financial reporting for $GNC during its bankruptcy?
WYCO Researcher profile picture
JC Penney store 2 blocks (in the Manhattan Mall) from THE Macy's store in NYC filed a notice today that they are closing. More and more retail stores around THE Macy's keep closing. Less reason to travel to the 34th St shopping area-not good for Macy's.
Courage & Conviction Investing profile picture
@WYCO Researcher This isn't unique to Macy's. All the real estate you own in NYC has tanked too. All the real estate all of your wealthy friends own in NYC has tanked. NYC real estate is now down probably down what 20% - 40% off the highs?

Commercial real estate and many REITs are serious trouble.

WYCO Researcher profile picture
As I posted in other M articles I have been very bearish on NYC for years. Over 8 years ago I saw the potential Dems running for mayor of NYC and I knew the city faced a major real problem going forward. Bloomberg is/was liberal, but at least he is good for business etc. The current mayor is an absolute IDIOT. In addition, there were many, many new buildings being built (such as Hudson Yards).-Who did they expect would shop at so much additional retail space? Also way too many hotels. I sold all my NYC holdings of commercial properties and land some time back. Most of my associates did as well. Mostly foreign buyers who did not understand the NYC market bought.

I do no expect to even visit NYC until Sept 2021. The city is dead and will never come back. Many people I know have left-forever and have taken their $$$$ with them. Not enough wealthy people left to pay taxes. If hedge funds leave -watch out-NYC will be BK.
Courage & Conviction Investing profile picture
Gotcha - For some reason I thought you lived in NYC. You and me haven't been in touch for a few years now, so I might have missed it.

The biggest risk to NYC is if the big banks leave not the hedge funds. The major banks are far and away more important to the NYC ecosystem. My friend worked at Paulson & Co. during its heyday. As you know, hedge funds are tiny outfits. How many people does JPM, MS, C, BAC, and GS employ in NYC?

Incidentally, At my old buy side job, Baupost (I used to occasionally see Seth Klarman in the elevator and lobby) was in the building. Maybe 100 people worked there (I heard from friend of friends that Baupost was an awesome place to work if you could get your foot in the door, though). One time, I saw Bob and Jon Kraft in the elevator going to up visit Baupost (I'm sure they are invested with Seth).

Anecdotally, the days of landlords charging $5K to $6 for a 1,200 square foot apartments are also over. What a scam that was. And all scams, eventually, end.
In case anybody was wondering about the title of this article - Mr. Market knows all. I am long M but don't kid yourself on outsmarting Mr. Market - this play has some potential upside to it - especially if you write some covered calls against the stock. I don't see a lot of upside price movement in the near future IMO.
Bull with the shorters saying bankruptcy....spreading rumors did one think?
10 largest e commerce...vast real estate holdings....long term buy
trying to get you to unload the retail coustomer
do your own research
Could be the last bit of pump before they fill for bankruptcy traders have seen this happen in the past many times with similar companies.
Shangrila Value profile picture
There won't be bankruptcy here.
Random Macro Analyst profile picture
@Courage & Conviction Investing

KBAL is right up your alley...check it out.
Random Macro Analyst profile picture
Strong balance sheet (net cash, last time I checked), produces furniture in 3 verticals...lagging recovery play
Courage & Conviction Investing profile picture
Thanks $BSET was one off for me at $5.90. I'm not a furniture investors, per se.

I love $RLGY, which I recently wrote up, on the free site.
quackmaster profile picture
Up 1000% on June call options.
Courage & Conviction Investing profile picture
@Douglas Duckworth Very nice. You were probably up 2000% at today's opening bell.
Random Macro Analyst profile picture
Nice one Doug
From his interview, Genette doesn’t seem to have any sense of urgency as far as closing stores at a faster pace...
He is happy to have borrowed 4.5 billions dollars which will provide him to have a job and the ability to waste more money on stores which should be sold...
As shareholders we need to hear about a restructuring plan much more agressive than the “Polaris “ plan outlined at the beginning of the year.
Adam Levine-Weinberg CFA profile picture
@Himal Did you watch/listen to the full conference presentation this morning? Either Genette or Williams (the interim CFO) literally said "everything's on the table". Hard to say what that will mean in practice, but it certainly sounds like Macy's is considering closing significantly more stores than the 125 contemplated as of a few months ago. It could also speed up the pace of closures rather than spreading them over three years.
Courage & Conviction Investing profile picture
@Adam Levine-Weinberg CFA I sold the rest of my Macy's at $10.40. I had 6,000 shares at my peak. I lost $13.2K. Despite that, my portfolio is still up 21% YTD.

The reason I sold was because I am super, super bearish on malls. So despite how awesome and valuable Macy's.com is and Macy's great urban real estate - the secular declines in malls is such a strong countervailing force.

I appreciate the excellent research you have done on Macy's. Perhaps, I will buy some shares back in the low $7s, should a correction take place. If not, no worries either.

Good luck to all.
Thank you for your answer.
I just hope you are right......
short attack today....nothing more on good future ahead with stable foundation....hold the line...and write covered calls...my opinions do your own research
Random Macro Analyst profile picture
@Courage & Conviction Investing You're on a tear, buddy
Courage & Conviction Investing profile picture
@ankram Thanks. From down 44.4% to up 22%. And I had 40% in cash during this 6 day epic run. Surreal.
Random Macro Analyst profile picture
I dug myself out of a hole too...Trying to pretend I am druckenmiller and just stayed mostly in cash the whole time...

@Courage & Conviction Investing
IT Gal profile picture
I dont care what anyone says, I still love Macys....as a store.
And I once loved it as a Dividend stock. I backed out of my holdings in Jan...when their retail was starting to show issues.
But....as someone who still loves the store (and shopping there) I couldnt pass up a 5$ deal.
I mean what the hell they were five dollars! LOL...I am usually frugal with my money, especially investing. But,...I chose to gamble on Macys and so far they are paying me back.
Let's see if they can continue.
Good for you!

I had some holdings from $20 level but I too could not give up the opportunity when it was around $5. To me this was insane.

Averaging down rocks. Comfortably green now and looking for a big bump tomorrow.
A spike up to $20+ on a short squeeze would be fun!!!!!!!!!

How many shorts still forgot to cover?
S Suen profile picture
I am not in US. May I ask if Wayfair is a pure online retailer while Macy's is a traditional retailer with eCommerce business? Is this the major difference between the two?
Courage & Conviction Investing profile picture
@S Suen Wayfair is online only adn losses tons of money, but everyone loves their growth rate : )
S Suen profile picture
May be this explain the valuation difference since W does not have the burden of physical retail assets and is a pure play in eCommerce while M still is quite traditional.

It's also interesting that W and M are two upside down letters! Haha...
Courage & Conviction Investing profile picture
@S Suen nice catch on the mirror image of letters. Macy's owns great real estate.
Going to ride this earnings momentum for a chance of a small pump, and exit. Went long at 6.36. 9.36 would be ideal but I’m perfectly fine getting out at $9 as well. Let’s see what premarket does. I believe bears are getting ready to get in position.
Courage & Conviction Investing profile picture
@Blessed 2 Invest Short interest comes out on Tuesday night (after the bell).
Thanks again for injecting faith in M. On top everything, short interest of 44% can really bring more gains for stock holders. On that note, do you have a recommended site to check daily short interest volumes?
foodman profile picture
@Fact_Search ;
I utilize ETrade, on the quote page, “fundamentals “
Provides the short interest ratio, I believe it’s revised weekly.
In the event that another contributor has additional information it would be greatly appreciated.
Courage & Conviction Investing profile picture
@Fact_Search Cheers!

The next short interest report comes out on June 9th (around 7pm) and I use the WSJ to check it.

See here.

foodman profile picture
@Courage & Conviction Investing
The 45% short float will drive the stock to $12 or higher in a couple days.
That’s over 130million shares.
Great call when you announced your opinion.
Your analysis was brilliant and very intriguing. I’m going to do the unthinkable and add 500 shares of M today. I’ve changed my investing strategy and am only buying stocks with momentum.
Sounds remarkable reasonable when I type it out. I’m buying lots of stocks in small quantities and of the 40 stocks I now own 38 are up. ROKU continues to slide but my other new rule is, I only buy quality stocks that I expect to be higher in 3 years and are way off their 52 week high.
Courage & Conviction Investing profile picture
@OneDakota Thanks. I sold 4K shares yesterday in the low $8s (still own 2K). After the blow out jobs number, I added back 1K at $8.90. This stock could squeeze to $10+ today.

I wonder how many hedge funds will be bankruptcy by day's end?
Haven't traded M for a short while. Got back in today. Does anyone know if they got a PPP Loan ? Thanks. And good article CCI !!!!!
Courage & Conviction Investing profile picture
@Mr. Driller I sold more than half of my position around $8.25. The market has had a big run. Buy it back slowly as we are due for a market correction. Macy's has gone from $6.30 to $8.49 (yesterday's intra-day high).
" I sold more than half of my position around $8.25. "

Ouch! It is up to $8.60 now premarket. Having said that though, I sold around 7% of my M shares yesterday at around $8.15. M is heading higher, the question is how much higher. I will gradually reduce my position further if it keeps rallying. It might get to $15 or higher soon though. Those shorting retail stocks are feeling plenty of pain not just from M. Short covering might even get M to $15. In case it doesn't get much higher, I decided to gradually reduce my M position over time. I did that with another retail stock, and when I was finally above even on that one including the trading profits I took on it earlier, I decided to get rid of the rest of the position.
Courage & Conviction Investing profile picture
I am the world's worst trader. I have left over 10% (or more) of overall portfolio performance on the table this year by selling my winners too early.

Oh well.
Macy should consider to spin off e-commence as IPO company to unlock value.
"Macy should consider to spin off e-commence as IPO company to unlock value."

Spinning off their real estate into a REIT would likely unlock much more value. Of course the timing needs to be right.
Which stock has not gone up really is the largest two month rally ever.
Of course the crowds will think its their great picks .
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