Macy’s Falls Apart

AUGUST 24, 2022

Macy’s Inc. (NYSE: M) became the most recent retailer to see its results disintegrate following other retailers, led in size by Target. Macy’s excuse looked like the others: we don’t have the inventory of what shoppers want, but we have too much inventory. It remains hard to see how seasoned executives could bungle such a critical aspect of their business. Additionally, Macy’s has cut prices for items that are inventory heavy.

Investors, who have begged Macy’s and other retailers not to continue to fall into the same trap, at least were cheered that Macy’s problems are less severe than at other retailers, and they bid the stock up slightly. It sits at $19 a share, down 26% this year. In other words, investors have been slaughtered.

Jeff Gennette, the board chair and chief executive officer of Macy’s, told WWD that his company is ready for the holidays. Oddly, that was at the same time Macy’s offered light guidance. Gennette spends a great deal of time talking to the media, while often saying little of value. Viewed another way, both of Gennette’s forecasts cannot be true. He also continues to sell his Polaris strategy to investors, although it has not worked. It makes the company “faster and more agile.” Really?

Earnings fell to $0.99 per share from $1.08 a year ago. Comparable store sales in the most recent quarter declined 1.5%. Of more concern is that digital sales, the future of America’s retailers, dropped 5%. It is another reason to be nervous about the holidays.

Macy’s caution about the road ahead was based on the macro environment. Presumably, that is a combination of inflation, high interest rates and a weakling gross domestic product. How can that help the holidays? It cannot.