​How New CEO Steers Turnaround at Macy’s

MoneyShow  |

Image via Nicholas Eckhart/Flickr CC

Department store retailer Macy’s (M) shares remain near multi-year lows despite the company’s reasonably decent 2nd quarter 2017 results backed by fresh and more aggressive leadership, says George Putnam, editor of The Turnaround Letter.

The market appears impatient for what will likely be a multi-year turnaround. Cash flows remain healthy and the balance sheet is improving. Valuation at 4.4x this year’s estimated EBITDA, which understates the value of much of Macy’s real estate, assumes an overly grim outlook for the company.

Driving the turnaround is a new order in the company’s leadership. We believe the market is overlooking the potential of this change.

Jeff Gennette, a steadily-rising company veteran, became CEO in March, bringing a fresh perspective and sense of urgency to Macy’s plans. Gennette has deep knowledge of Macy’s operations and a strong reputation as an outstanding merchant.

Macy’s retail turnaround will not be successful overnight. They must get their merchandising and distribution right, adjust to the changing consumer preferences, meet the shifting and relentless competition, and ramp up their marketing -- making the retail turnaround likely to take two or more years.

Macy’s real estate initiatives are progressing well although it is too early to foresee the exact end-game.

The company has many levers to pull, including selling the Harold Square property in midtown Manhattan (that could be worth $4 billion by itself).

Importantly, the company is maintaining their capital spending plans of $900 million for the year, suggesting they are not skimping on store upkeep and overall modernization.

Overall, the company is making the right moves which seem to be working, just not at the pace of an impatient Wall Street that wants immediate changes.

The shares are remarkably inexpensive. The $1.51 dividend looks well-covered, providing a high 6.7% yield. As long as this remains solid, (we believe it will), the yield should provide a floor to the stock while we patiently wait for more traction in the turnaround.

George Putnam is editor of The Turnaround Letter.

Subscribe to The Turnaround Letter here…

About MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


Symbol Name Price Change % Volume
M Macy's Inc 15.12 -0.66 -4.18 18,347,201 Trade



Symbol Last Price Change % Change






Can the Media Solve the Partisan Conflict?

Andrew McCarthy, Contributing Editor, The National Review; Michael Zeldin, CNN Legal Analyst; Celeste Katz, Senior Political Reporter, Glamour; Silvia Davi, SVP, Contributing Editor, Equities.com; and Doug Simon, CEO, D S Simon Media discuss how the media’s role has shaped the landscape for communicators and what the media is trying to do to reduce discord in society.