Macy’s future

Like all the retail stores, Macy has been hit hard in recent years due to the shopping habit changes of customers. Less and less people will go to shopping malls or stores but rather will simply take the convenience of shopping online. With very slow adaption to the new trend, Macy is really struggling. Following the poor earnings a couple of weeks ago, Macy has crashed to $30ish but then the outgoing CEO announced that Macy will be available for sale. Regardless how much it is struggling, Macy is still generating good cash flow and at this price, it is really cheap valuation wise. It is paying over 4% dividends. As such, deal hunters will come to buy Macy at a discounted price. Sure enough, the Canadian company, Hudson’s Bay said they would be interested to buy Macy. Macy’s price immediately shot up to $35. But then last week, it was reported that Hudson Bay may have some troubles in financing for the deal. The poor Macy got hammered hard, back down to $30 again.

 

I certainly don’t know if the Hudson Bay’s deal will go through or not but regardless, a no deal has already been priced in and Macy is out there again looking for being sold. At this very cheap valuation with such a good dividend, I don’t think its downside risk is big prior to its next earnings. And the MA expectation will also support its current price at the moment. If the current potential deal revives or another new deal is popping up, Macy will shoot up easily for 15-20%. While there is no guarantee, I think this is reasonable speculation for risk takers.