On Tuesday, Macy’s (NYSE:M) shares faced a downgrade by Goldman Sachs, moving from a "Buy" to a "Neutral" stance. The firm also reduced the price target for the retailer to $12.00 from the previous $17.00. Goldman Sachs cited concerns over rising macroeconomic uncertainty and increased cyclicality risk as key factors influencing their decision. According to InvestingPro data, Macy’s stock has declined nearly 30% over the past six months, while currently trading at a P/E ratio of 5.1x, suggesting a relatively low earnings multiple.
The change in rating comes as Goldman Sachs analysts observe that department store sales tend to lag during economic downturns. The current economic landscape, characterized by slowing GDP growth and persistent inflation, is prompting a more cautious approach. According to the analysts, while Macy’s continues to modernize and optimize its operations, the risks associated with near-term execution are considered high. They also pointed out that broader macroeconomic pressures could delay the company’s return to more favorable trends. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 1.43, though eight analysts have recently revised their earnings expectations downward.
Goldman Sachs acknowledges Macy’s efforts to refresh its brand and streamline its store portfolio. However, the firm prefers to wait for clearer signs of consumer health and margin stability before reconsidering its position on the stock. The analysts believe that a more prudent stance is warranted until there is better visibility on these fronts. Despite these challenges, InvestingPro data reveals Macy’s has maintained dividend payments for 23 consecutive years, currently offering a significant 6.8% dividend yield to shareholders.
The downgrade reflects a broader sentiment of caution as the retail sector navigates through a challenging economic period. Macy’s, like many other department stores, is working to adapt to a rapidly changing retail landscape, but external economic factors continue to pose significant challenges.
Macy’s stock performance in the coming months will likely be closely watched by investors as they assess the impact of Goldman Sachs’ revised outlook. The company’s ability to manage the current economic headwinds while continuing to innovate and attract customers will be crucial to its success.
In other recent news, Macy’s announced the appointment of Thomas J. Edwards as its new Chief Operating Officer and Chief Financial Officer, effective June 22nd. This leadership change is part of the company’s strategy to foster long-term growth. In financial developments, Macy’s reported an earnings per share (EPS) of $1.80 for the fourth quarter, exceeding expectations of $1.54, though this was partially due to one-time adjustments. Despite this, the company experienced a 1.1% decline in owned comparable sales, which fell short of the expected -0.2%.
Analysts have responded to these developments with mixed ratings. TD Cowen, Telsey Advisory Group, Citi, and JPMorgan all reduced their price targets for Macy’s to $14 or $15, citing concerns over future sales and macroeconomic challenges. TD Cowen and Citi maintained a Neutral rating, while Telsey kept a Market Perform rating. JPMorgan downgraded Macy’s stock from Overweight to Neutral, reflecting concerns about the company’s performance and future earnings potential.
Macy’s has provided a cautious fiscal year 2025 outlook, with an EPS guidance of $2.29, which is 7% below analysts’ expectations. The company anticipates same-store sales to decline between 0.5% and 2.0% for the year. These projections come amid ongoing macroeconomic uncertainties, including inflation and consumer spending pressures.
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