J.P. Morgan Upgrades Macy’s Inc.
Macy’s modernization strategies, which continued Monday when a rebranding was unveiled, are apparently going over well by some on Wall Street.
At the closing bell on Monday, Macy’s stock price was up 7.5 percent, or $1.31, to $18.78, following an upgrade by J.P. Morgan to an “overweight with favorable risk/reward” rating from a “neutral” rating. An overweight rating suggests a company’s stock price should perform better in the future.
More from WWD
Last week, at J.P. Morgan’s 9th Annual Retail Round-Up, Macy’s outgoing chairman and chief executive officer Jeff Gennette and chief financial officer Adrian Mitchell gave a progress report on the business and its strategies for growth, and explained the succession plan. As reported, in February 2024 Gennette will be succeeded by Tony Spring, now president of Macy’s Inc. and former Bloomingdale’s CEO, and Mitchell added the title of chief operating officer.
In his Macy’s upgrade report, Matthew Boss, J.P. Morgan’s managing director of equity research, retailing, gave a thumb’s up on Macy’s fiscal 2023 plan and its five growth vectors — which are expected to drive a return to low-single-digit top-line growth and incremental earnings before interest, taxes, depreciation and amortization margin expansion in fiscal 2024. The five growth vectors are off-mall store expansion, digital marketplace, luxury brands, private brands and personalization.
“The key takeaway from our meetings was clear confidence in FY23’s top/bottom-line plan (including 1Q despite industry-wide March softness by our work) and multiyear low-double-digit EBITDA margin profile with 5 ‘self-help’ growth vectors driving a return to low-single-digit top-line growth and incremental EBITDA margin expansion year-over-year in FY24,” Boss said.
He also cited “foundational change” initiated in 2020 centered on operational discipline including inventory levels exiting holiday 2022 at 18 percent below FY19, merchandising changes leveraging technology investments and field leadership with structural change in the buying and incentive process in 2021, closing 80 doors since 2019 and industry consolidation providing a catalyst for smaller off-mall concept expansion.
Boss pointed to a “clean balance sheet” with no material debt maturities until 2027; “increased liquidity for buyers to read/react against trends with greater agility; pricing tools used to make informed decisions by category/region; the pivot to up-front discounts versus a markdown allowance at the end of the season; the rollout of Toys ‘R’ Us shops to all Macy’s stores; the opening of eight Market by Macy’s and two Bloomies specialty stores so far; investments in employee benefits; streamlining the headcount, and the one-two punch of CEO-elect Tony Spring and CFO/COO Adrian Mitchell.”
In its rebranding, Macy’s in-house team has redesigned its logo, ticker symbol and corporate website. The same team designs Macys.com and Macy’s Media site.
For the Macy’s Inc. mark, the signature Macy’s star has moved. It had served as an apostrophe for Macy’s, but now sits atop the lower case letter ‘i’ in macys inc. The stock ticker symbol has been redesigned with a small star on the top left side of the “m.”
Best of WWD
