Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

The Incredibly Shrinking Macy’s

Anybody who doubts the reality of the Great Retail Apocalypse has not taken a look at Macy’s (NYSE: M) financial numbers. The department store giant is wasting away to nothing before our eyes.

The latest shrinkage at Macy’s includes:

  • A stock price of $20.79 on 31 August 2017, as recently as November 22, 2016, Macy’s shares were trading at $44.46.


  • Revenues of $25.03 billion on July 31, 2017, this figure was down from $26.38 billion in July 2016, $27.89 billion in July 2015 and $28.02 in July 2014.


  • Revenues that keep falling each quarter. Macy’s reported revenues of $26.38 billion in July 2016 that fell to $26.13 billion in October 2016, $25.78 billion in January 2017, $25.43 billion April 2017 and $25.03 billion in July.

  • Macy’s revenue loss has been accelerating each quarter, in third quarter 2016 it was $25 million; that increased to $35 million in the last quarter of 2016 a performance that was repeated in first quarter 2017. In the quarter that ended on July 31, 2017, Macy’s revenues fell by $40 million.


  • A net income of $679 million on July 31, 2017. Macy’s reported a net income of $789 million in July 2016 and $1.42 billion July 2016.


  • If ycharts’ data is accurate, more than half of Macy’s income; or $741 million, has disappeared over the last two years.


  • A free cash flow of $107 million on July 31, 2017.


  • Cash and short-term investments of $783 million on July 31, 2017, that number was down from $1 billion a year earlier.

  • $1.77 billion in cash from operations on 31 July 2017. That number was $2.146 billion in July 2016, $2.371 billion in July 2015 and $2.621 billion in July 2014.


  • Macy’s cash from operations has fallen by $851 million over the past three years.


  • Assets of $18.58 billion. This number was down from $19.71 billion in July 2016, $20.12 billion in July 2015 and $20.62 billion in July 2014.


  • An enterprise value of $11.97 billion on 30 August 31, 2017. This is the most dismal figure because Macy’s had an enterprise value of $18.41 billion on 30 August 2016, $25.60 billion on September 1, 2015 and $26.84 billion on August 19, 2015.


  • If these numbers are correct Macy’s has lost half its’ enterprise value in a little over three years. By the numbers Macy’s enterprise value has declined by $15.06 billion in three years. Yikes!!

  • A market capitalization of $6.332 billion on 31 August 2017, Macy’s had a market cap of $11.78 billion on 30, August 2016, $19.18 billion on September 1, 2015 and $22.56 billion on August 26, 2014.


  • Macy’s has lost more than three fourths of its market capitalization in the last three years. By my calculation that made for a decline of $16.288 billion.


Is Macy’s in the Death Spiral?

To my amateur eyes it looks as if Macy’s is in the death spiral. The company is certainly acting like an organization in the death spiral cutting 100 jobs and replacing its president on August 22, USA Today reported.

A sure sign of desperation was Macy’s decision to tap former eBay (NASDAQ: EBAY) executive Hal Lawton as its new president. The hope is that Lawton will be able to wave his magic wand and transform Macy’s into an ecommerce company.

Other signs of Macy’s decline include the decision earlier this year to close 140 department stores. Another round of closing is likely to follow the latest dismal earnings report.

Part of the reason for the death spiral is that Macy’s is heavily exposed to shopping malls and to smaller markets. It is particularly vulnerable to Amazon (NASDAQ: AMZN) in such environments, where Walmart is the only other clothing retailer.

Persons in places like Canton, Illinois; where Macy’s closed in July, now have two basic choices for clothing Amazon and Walmart. That’s good news for Jeff Bezos but bad news for brick and mortar merchants.

A likely trend is that the retail apocalypse will accelerate because when Macy’s closes it gives people less incentive to go to the mall. That causes other retailers to shut down and provides more subjects for Dan Bell’s fascinating but depressing Dead Mall YouTube Channel. 

Also likely to die out soon are the 37.78¢ divided last paid on June 13, 2017 and the 16.28% return on equity reported on July 31, 2017. Stay away from Macy’s investors it is heading to the retail graveyard fast.