Macy’s Shares Gutted by More Bad Retail News, Fear It Cannot Survive

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Amazon.com Inc.’s (NASDAQ: AMZN) plan to compete with Best Buy Co. Inc.’s (NYSE: BBY) Geek Squad sent the brick-and-mortar retailer’s shares down 6.2%. Gap Inc.’s (NYSE: GPS) share dropped 6.3% as a deal to buy Abercrombie & Fitch Co. (NYSE: ANF), a rival, fell through. However, of all the retailer shares that dropped yesterday, deeply troubled Macy’s Inc. (NYSE: M) fell the most, by 7.1%, a sign of how fragile Wall Street thinks the company is, and raising questions about its possibly terrible future.

At $21.08 a share, Macy’s trades at the bottom of its 52-week price range of $45.41 to $21.07. One reason its shares may have dropped so much is that Amazon has started its Prime Day, an annual day of sharp discounts and special deals for its Prime members who pay $99 a year for free shipping and streaming media, among other things. Many analysts believe the event sucks sales away from other retailers, although that is only a theory.

The drop in Macy’s shares shows that almost any bad news about retail, even if it does not much affect the company directly, can send investors fleeing. Macy’s will¬†cut the price of cosmetics, according to The Wall Street Journal, which is hardly enough to shave half a billion off its market cap. Rather, the deeply held belief that Macy’s cannot survive continued¬†retreats in store counts and price now drive investor action.

Macy’s balances precariously on the edge of whether it is the next Sears Holdings Corp. (NASDAQ: SHLD) or a store that might survive if it can “downsize” enough. The downsizing strategy would leave it with a small national footprint to support what is still a widely known brand. It would also mean that the infrastructure of high management costs and distribution channels would have to be dismantled. Its price leverage with suppliers would also be hurt.

All the recent news about large retail companies, whether or not they compete with Macy’s, is a reminder that the aged retailer has not found a way to reinvent itself, and may not be able to.