The company’s shares reached a new 52-week low after being downgraded by Guggenheim.
Retail stocks have had a tough go of it lately. JCPenney’s stock exchange listing is in jeopardy and Macy’s, JCPenney, and Kohl’s all recently delivered uninspiring earnings reports.
During the latest round of earnings reports, JCPenney and Kohl’s had at least some good news to share with investors. But Macy’s earnings report was particularly brutal. The company’s earnings and same-store sales fell short of forecasts.
And on Friday, Macy’s was downgraded by Guggenheim from buy to neutral. The analyst said he doesn’t see the company’s headwinds going away anytime soon. This caused the company’s shares to fall to $15.26, which is a new 52-week low for Macy’s.
That said, Macy’s executives still claim the company can turn things around and return to profitability. And the execs have big plans to make that happen. Here are a few things to watch from Macy’s in the coming year…
Cost Improvements and Inventory Management
During the second quarter, one of Macy’s biggest problems was an excess of inventory. The company entered the quarter with too much of it. The problem worsened when Macy’s then couldn’t get rid of it due to weak sales. This forced the company to offer steep markdowns that hurt its margins.
Fortunately, the company is in a much better position going into the third quarter. Macy’s plans to focus on managing its inventory better so it won’t fall into the same position during the fall and winter months. Macy’s plans to do this by implementing new inventory management tools that will help the company going forward.
Store Upgrades
Macy’s CEO Jeff Gennette acknowledged that sales are declining at most of the company’s neighborhood stores. However, Gennette said that these stores have become more profitable thanks to more efficient operations.
And Macy’s plans to invest in upgrades at its flagship stores and 150 of its non-flagship stores. The company is hoping that these investments will drive more traffic and sales to these locations.
Apparel Rental Service
Macy’s is partnering with the resale marketplace ThredUp to launch a pilot program in 40 of its stores across the country. The company is attempting to reach a new market and begin offering clothing rental and resale options.
This pivot could be a good move for the company. Increasingly, consumers want the option to rent clothes, and services like Rent the Runway have taken off in recent years. Companies like American Eagle, Nike, Express, and Ann Taylor have also launched rental or subscription clothing options.
It’s good to see that Macy’s is attempting to pivot and make the best of a difficult situation. The company has identified big problem areas and is working to solve those issues. But while a turnaround isn’t impossible, it also doesn’t seem very likely at the moment.
The company’s shares are down 48% year to date and nearly 60% from a year earlier. Macy’s will need to do a lot more if they want to capture more retail market share and renew investor confidence.
