Macy’s Stock Plunges 22% in First Half of 2023 Due to Ongoing Retail Woes
Shares of Macy’s, the renowned department store chain, have seen a staggering 22% drop in the first half of 2023, according to data from S&P Global Market Intelligence. This decline comes as no surprise, considering the ongoing struggles faced by the retail giant. Macy’s recently lowered its full-year guidance following a disappointing first-quarter report.
The decline of department stores and malls, once a cornerstone of the retail industry in the 1980s and 1990s, has been a long-standing trend. Many iconic brands from that era are now barely surviving, desperately attempting to recapture their former glory.
Macy’s has implemented various measures in an attempt to overcome these challenges. These include store closures, experimenting with different store sizes, introducing brand stores-within-a-store, strengthening its digital presence, and more. However, these efforts feel like temporary fixes for a problem that continues to persist.
The retailer has not been immune to external factors such as the pandemic, supply chain disruptions experienced last year, and ongoing inflation issues in 2023. Despite facing numerous internal and external headwinds, Macy’s continues to fight to stay afloat. However, it frequently finds itself knocked down by these adversities.
In the first quarter of 2023, Macy’s reported a 7% decline in sales compared to the previous year, while earnings per share dropped from $0.98 to $0.56. On a positive note, its efforts to improve efficiency yielded some results, with gross margin improving from 39.6% to 40% compared to the previous year. The company also expects to achieve $200 million in cost savings for the year.
The most worrisome aspect of Macy’s first-quarter report was the dismal state of the retail industry, which exceeded even the company’s projections. As a result, management revised its full-year outlook, now expecting sales of $22.8 billion to $23.2 billion, down from the earlier forecast of $23.7 billion to $24.2 billion. The revised estimate also foresees a sharper year-over-year decline in comparable-store sales of 6% to 7.5%, compared to the previous projection of a 2% to 4% drop. Furthermore, the expected EPS range is now $2.70 to $3.20, significantly lower than the previous estimate of $3.67 to $4.11.
Macy’s is currently grappling with a myriad of challenges, making it a high-risk investment proposition. While the company boasts excellent management and is addressing its problems in a prudent manner, its traditional retail model is struggling to remain relevant in today’s ever-evolving consumer landscape.
However, this does not imply that Macy’s is destined for failure. As a multibillion-dollar enterprise, the company remains profitable, demonstrating its financial stability. Additionally, the current low stock price offers investors a dividend yield of 4%.
Despite the headwinds, Macy’s must navigate; it is important to recognize that the company is not on an upward trajectory. Investors seeking growth opportunities may find more promising prospects in other stocks.
