Near Historic Lows, Is Macy's Stock A Present For Investors Or Just Coal?

Macy's (NYSE: M) stock price has been in a precipitous decline for the past five years. After reaching its all-time high of $72.31 on July 13, 2015, the price shed more than 75% of its value. Macy's stock price hasn't been this low since the financial crisis in 2008. And before then, Macy's traded at a similar price more than 20 years ago in 1997. So, with the consumer discretionary stock's price down so much, plus a dividend yield above 9%, Macy's seems to be pricing in a lot of bad news. Are investors overreacting to Macy's outlook?

Anyone not living under a rock knows that Macy's business model is under pressure from the rise of e-commerce. Macy's sales have declined at a compounded annual rate of 2.2% over the past five years. But that's not horrible. Further, gross margins have stayed relatively stable in the 39% to 40% area. Again, not the worst seen in the retail sector.

On a brighter note, same-store sales were actually positive in 2018, and were positive for seven consecutive quarters until the recent third-quarter comps came in below expectations at negative 3.5%. Reasons for the weakness included soft international tourism, weak lower-tiered mall performance, and the late arrival of winter. At least part of that should be transient. Still, the disappointing third-quarter contributed to Macy's lowering its full-year comparable store guidance to a negative number, versus positive guidance it previously issued. It also lowered its EPS guidance for the second time in as many quarters, which is now 15% lower than where it started the year.

Source Fool.com