Retail

Will Anyone Show Up At Macy's 775 Stores?

Over the next two months, Macy’s Inc (NYSE: M) will open all 775 of its stores. This includes its Bluemercury outlets. The company’s CEO Jeff Gennette says he does not know how many people will show up. He hopes store traffic will return, over time, as consumers are allowed to leave their homes. What the results of Amazon.com, Inc’s (NASDAQ: AMZN) earnings show are that people may have moved their shopping online- in some cases completely.

Macy’s does have an online presence, but its does not represent a large portion of the retailer’s $25 billion in revenue.  Macy’s sales were off a modest amount before the COVID-10 spread shuttered its physical operations. In its most recently announced quarter, revenue was $8.3 billion. It provided guidance for the current year, which obviously now is worthless.

To say Macy’s is in financial distress is an understatement. It recently took on $5 billion in debt from Bank of America and other financial institutions. Prior to the deal, Macy’s had killed its dividend and drawn down $1.5 billion from a revolving line of credit

Amazon.com’s earnings show the extent to which people flooded to e-commerce over the last two months. Revenue rose to $75.4 billion from $59.7 billion in the previous year.  Revenue from North American operations reached $53.7 billion up 29%.

Macy’s may pick up some business from retailers like J.C. Penney Company, Inc (NYSE: JCP), but it will have to compete with larger bricks-and-mortar retailers like Walmart, Inc. (NYSE: WMT) which have many more stores and a much broader footprint geographically.

It has been said for many years that Amazon killed the traditional retail industry. The spread of COVID-19 accelerated that process, and Macy’s cannot reverse that.

 

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