Published Wed, 25 Mar 2020 14:53:01 -0400 on Seeking Alpha
M suspended its dividend. This should help cash flow going forward.
M must pare debt to appease the rating agencies.
M is off about 75% Y/Y. Until the company can arrest the slide in revenue and earnings, the stock remains a sell.
It has been a tough environment for traditional retailers like Macy's (M). Last week, the company suspended its quarterly dividend:
Macy's (M) suspends its regular quarterly dividend and draws down $1.5B under its credit facility as a proactive measure to provide the retailer with financial flexibility amid the continued spread and impact of Covid-19.
The company's previously announced dividend payment occurring on April 1, 2020, isn't affected by the suspension.
Additionally, Macy's is reviewing all non-essential operating expenses for opportunities to lower spending and is reducing its capital expenditures in 2020.
Withdraws 2020 sales and earnings guidance issued on Feb. 5 and confirmed on Feb. 25.
This was a smart move, in my opinion. The coronavirus has led to social distancing. This has caused traffic for retailers with physical locations to plummet. Most retail sales are now occurring online. Prior to the negative effects of the coronavirus, shoppers had shifted their preferences from mall-based retailers to online retailers and off-price retailers like TJ Maxx (TJX) and Burlington (BURL).
Meanwhile, Macy's appears to be running in quicksand. During its most recent quarter, the revenue of $8.3 billion fell 1% Y/Y. Comparable sales for owned plus licensed fell 0.5%. Backstage, the company's off-price business showed promise; however, it needs to add more scale so it can have a meaningful impact on financial results. Gross margin of 36.8% fell 60 basis points versus the year-earlier period. EBITDA margin of 12.3% was down 50 basis points. The company must continue to invest in its digital platform to keep pace with Target (NYSE: TGT) and Walmart (WMT). This could continue to weigh... Read more