Macy’s Sales Slump Over 40% in Q1; Doesn’t Anticipate Another Full Shutdown

Macy’s Inc, an American department store chain founded by Xavier Warren in 1929, posted a $3.58 billion loss as the coronavirus-induced lockdown hit its first-quarter sales, leading to a record $3 billion impairment charge.

The fashion retailer, who also owns Bloomingdale’s reported that first-quarter sales through May 2 almost halved to $3.02 billion. Additionally, it reported a net loss of $11.53 per share, compared with a profit of 44 cents a year ago.

However, the company expects Q2 comparable sales to improve by nearly 6-7 percentage points, as against a 35% fall in the prior quarter, Macy’s said. The company reported $1.52 billion in net cash and cash equivalents, combined with $18.58 billion in total liabilities and shareholders’ equity.

“The first quarter of 2020 was challenging for the country, the industry and Macy’s, Inc. While our stores are re-opened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year. We do not anticipate another full shutdown, but we are staying flexible and are prepared to address increases in cases on a regional level,” Jeff Gennette, chairman and chief executive officer of Macy’s, Inc said in a press release.

“We are meeting our customers how and where they are shopping and have enhanced our fulfilment options and health precautions to ensure a safe and welcoming shopping experience. While we continue to see challenges ahead, we’ve taken the necessary actions to stabilize our business and give us financial flexibility. We are confident we have the right strategy and plans in place to navigate the shifting retail landscape,” he added.

Following this announcement, Macy’s shares fell over 3% in premarket trading.

Macy’s Inc outlook and price target

Eight analysts forecast the average price in 12 months at $5.64 with a high forecast of $9.00 and a low forecast of $3.00. The average price target represents a -19.54% decrease from the last price of $7.01, according to Tipranks. From those eight, nice rated ‘Buy’, three analysts rated ‘Hold’ and five rated ‘Sell’.

Cowen and Company raised target price to $9 from $7 and Credit Suisse raised price target to $6 from $4.5. Morgan Stanley target price is $6 with a high of $19 under a bull scenario and $1 under the worst-case scenario.

Analyst comment

“Macy’s continues to undergo core operating challenges, similar to peers in the department store space. Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Expense cuts, real estate monetization, and secondary growth initiatives are encouraging, but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. In the event of a 2020 recession, Macy’s likely struggles to survive as it is currently operating,” he added.