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Macy's Is Out Of The Hole But Has Nowhere To Go

Mar. 03, 2021 9:20 PM ETMacy's, Inc. (M)20 Comments
Mitko Atanasov profile picture
Mitko Atanasov


  • Macy's shares are back to 2019 levels but 2021 estimates suggest 18% lower revenue, 37% lower EBITDA and 50% lower earnings.
  • Q1 of 2021 will be loss-making, with 75% of EBITDA coming in the second half of the year.
  • Adjusted diluted EPS Between $0.40 and $0.90.
  • Up to 38% downside risk.

Investment Thesis

Macy's (NYSE:M) shares have reached the pre-pandemic (2019) level, but Macy’s is just a shadow of its former self. The company’s estimates for 2021 suggest 18% lower revenue, 37% lower EBITDA and 50% lower earnings compared to 2019. Shares of the firm cannot be backed up by anywhere near the fundamentals of 2019. With a plan in place for debt reduction and transformation at the expense of dividends and buybacks, it might be heading for a 38% price correction.

Share Price

The pandemic has hit hard Macy’s stock. The vast majority of the firm’s stores are in huge malls which were among the very first victims by the measures the U.S government had to take, to curb the spread of the virus. This decision cost a lot to Macy’s and many of its peers and led to the massive share drop. Lured by the uncertainty around the future of retail and filings for bankruptcy of names such as J.C. Penney, J.Crew and Neiman Marcus, funds did short the stock anticipating a similar outcome. On the 30th of June 2020, the company had as much as 158.6 million shares short or approximately 51.6% of the float.

The recent stock price surge has short squeezed a number of funds and forced many of them to cover their losses, potentially boosting the stock price further.

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Source: M Short Interest Ratio (Macy's) | MarketBeat

Despite the odds being against the firm, Macy’s stock has made an impressive comeback. From lows as $4.38 almost a year ago, the stock is now in the $15 range. Some of its peers and closest rivals such as Nordstrom (JWN) and Kohl’s (KSS) also did make an impressive return, showing a positive market sentiment towards the recovery of this sector.

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Source: Seekingalpha.com

With 15% of the U.S. population

This article was written by

Mitko Atanasov profile picture
Mitko Atanasov holds an MA in Finance and has served as an equity analyst for one of the UK's largest asset management firms. His Personal stock market experience began in 2010 as a long-term investor. Since then, he has capitalized on opportunities for short- to medium-term investment and market volatility.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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 (20)

Market is over optimistic on the recovery.
It had its fair share of trouble before 2020.
Here are the fundamentals.
It's good you looked back to look to the future, but you need to look a bit further out to 2022, as this pandemic is still going to have an impact on this years' results. Macy's, Kohl's and Nordstrom have all offered what are likely conservative EBITDA forecasts for this coming fiscal year on their 4Q 2020 earnings reports. They are below 2019 results, (which weren't great), as a % of 2019 EBITDA; Macy's 68%, Kohl's 81%, Nordstrom 84%. Macy's is a trailer because it depends fair amount on tourists to its Flagship stores in NYC, SF and Chicago. Right now that component has only one way to go and that is up and will have a positive impact on the back half of 2021 and 2022. That said, based on the outlooks, this year's forward EBITDA multiples are - Macy's 5.1x , Kohl's 5.0x, Nordstrom 7.0x. (Nordstrom and other higher-end retailers, for as long as I remember, always trade at a premium for no reason other than the PM's are more likely to frequent them.). In addition, FCF estimates are - Macy's $750 mill , Kohl's $950 mill., Nordstrom $600 mill. One last thought - all of these stores as part of a Mall have independent entrances to the parking lots. I suggest readers look at the 8K and 10K's of these retailers for more details of their digital platform and actual results.
OverTheHorizon profile picture
Hardly. The death of the department store has been highly exaggerated. M is now at fighting weight having closed a majority of it's underperforming stores. Surging employment, stimulus checks, vaccine rollout--what more do you want?
munhoi profile picture
youre probably causing the short squeeze with your article and getting people wiped out on put options, at least my put are worthless after today

they are going to short squeeze this the more bad articles that come out , youre probably a short yourself trying to get people to lose money by shorting this
You have no where to go lol
Guidance is held back and conservative.
Economy reopening + latest round of stimulus both huge.
@Mitko Atanasov looks like 38% upside is more likely. :)
David Tepper has taken a small position in M according to his latest filing. Long M.
OverTheHorizon profile picture
Brick and mortar is not dead—in fact it’s making a resurgence as people realize they cannot shop online for clothing nor enjoy the experience. Less revenue? At the expense of greater profitability? This is a problem?
Mitko Atanasov profile picture
@OverTheHorizon I do agree with you, but this company has been earning less EPS year over year. I just don't see the company going back to 24-25 billion of revenue any time soon, with a similar proportion coming from brick and mortar.
OverTheHorizon profile picture
@Mitko Atanasov Ot doesn’t need to. It will be profitable with less revenue and a smaller footprint.
munhoi profile picture
@Mitko Atanasov I used to go to the mall frequently especially just for Macys havent been there in over a year and have not shopped online on Macys either too many options these days and yes I rather buy online now
Macy’s is coming out of a global pandemic hit. Looking at Revenue pre COVID and comparing it now is ridiculous...you can say the same for airlines and hospitality and live sports...the key is that Macy’s survived...suspended the dividend has closed underperforming stores that didn’t generate profit, has shifted to digital, still has real estate, has managed inventory and generated a lot of nostalgia and goodwill by the fireworks and parade. Lots of pent up demand as kids and adults return to the office and school...and a lot of people tired of shopping online and wanting to go back to stores...drive around a parking lot of retail establishments...Macy’s will be mid to high 20s by the end of 2021
Daniel-san profile picture
I skimmed this so maybe I missed it but I noticed you pointed out that Macy's will have substantially less revenue activity - but did you also mention how they'll have substantially lower expenses by reducing overhead, as so many companies have done over the last year?
Mitko Atanasov profile picture
@Daniel-san You do realize the bottom line is the most important factor in retail?
Daniel-san profile picture
@Mitko Atanasov - as it is in any business, and that was my point
Mitko you assume that in 2019 Macys was actually valued correctly, it was not. Mr. Market likes to manipulate stock prices and that is why you see price fluctuations of stocks like GME, TSLA , ZM, JWN etc change so much is such a short period of time. M use to be a heavily shorted (hello manipulation) stock back in 2019 2020 with 30%-40%+ of float shorted. Most recently that figure stands at just14%. I would argue that Macy's is priced closer to its actual value Today than it was in 2019 and that is why you're analysis is flawed by comparing two price points in time. Btw Macy's insiders haven't directly bought any shares for about 2 years and many sold back in February of 2020 right before the shutdown occurred. However recently an insider just bought about 40,000 shares on the open market at 15.40 for a little bit over 600k. I think he would also agree that your analysis is flawed. More stimulus is on the way, Vaccinations, and id bet trade war tariffs are next to be gone by this year under Biden. Loooooong M.
@billyb1980 Yes, you nailed it with your first sentence. There is no such thing as a 'correct price' for any stock. There are only opinions. And the only opinions that matter are the ones that manifest as selling or buying.
Mitko Atanasov profile picture
@billyb1980 I am sorry If I might have misled you with the name of the article. To put the record straight:
As a long term investment, I would probably put money in Macy's. However, in terms of the current price, I don't think it is correct for the moment.

I believe that the $12-$13 range would be more appropriate at this point. and this would probably be until Q2, then I expect until Q4 shares to be in the $15-$17.

All I was trying to say is that I don't see it going up in the next 5-6 months.
@Mitko Atanasov the market is forward seeing about 6-9 months. Nothing trades at current value.. just look at Tesla and so many more trading years in the future. If you believe Macy's should be valued between 15-17 in Q4 then the current price at 15 is already reflective of this.
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