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Macy's is having a really awful year

Brian Sozzi
Editor-at-Large

Just when you thought it couldn’t get any worse this year for the stumbling Macy’s (M).

Macy’s revealed Monday evening that it has begun a search for a CEO to lead the 157 store-plus BlueMercury cosmetics chain. The brand’s founders, CEO Marla Beck and Chief Operating Officer Barry Beck, will leave the company. Barry will step down on September 20 and Marla will remain at Macy’s through a transition period.

BlueMercury was founded 20 years ago and acquired by Macy’s in 2015 for a pretty penny of $210 million. Since then, the argument could be made Macy’s hasn’t done much to exploit the brand’s cachet with consumers.

The products aren’t featured prominently on Macy’s website nor in most of its stores. Macy’s has opened 20 or so BlueMercury shops inside its stores.

But for the most part, since 2015 Macy’s has been too focused on closing underperforming department stores, selling real estate, cutting costs, keeping inventory lean and opening off-price shops in its stores. So who can blame the Beck’s for wanting to wave goodbye to all that non-growth nonsense.

It’s unfortunate because with the cosmetics industry experiencing a slowdown (thank you Ulta Beauty for that shoutout last month), experience like the Becks’ is what is needed.

Marla and Barry Beck, Bluemercury Founders, greet customers on January 13, 2016 at Bluemercury at Macy’s Union Square in San Francisco, CA, Wednesday, January 13, 2016 in San Francisco, CA. (Sammy Dallal / AP Images for Macy's)

Macy’s stock dove 5% on the news of Barry Beck’s departure. And that is the correct market reaction — it’s yet another bad look for a company that is stringing up major losses this year.

The department store retailer is fresh off a nasty second quarter earnings whiff in August and haircut to its full year guidance. Embarrassing. And despite Macy’s executives discussing some $400 million to $550 million in cost savings at the widely watched Goldman Sachs retail conference earlier this month, the market has largely yawned.

The stock has flat-lined since Sept. 10, days removed from getting a boost from the latest cost-cutting promises. Macy’s stock is down 44% year-to-date. Both reactions signal a lack of confidence in Macy’s upcoming holiday season and longer term outlook.

A struggling legacy department store

data dive on Macy’s via the expansive Yahoo Finance platform unearths a host of stats that Macy’s executives surely would rather not feast their eyes on. But they perfectly capture the story on Macy’s as of today: that is one of a struggling legacy department store with high levels of debt — not an envious positions in the age of Amazon-led digital shopping

Some of the lowlights include:

  • Macy’s market cap has shrunk to $4.85 billion currently from $8.1 billion on Jan. 31, 2019. On Jan. 31, 2015, Macy’s market cap stood at a little over $22 billion.

  • Macy’s stock trades on a forward price-to-earnings multiple of 5.3 times, down from 7.5 times as of Jan. 31, 2019. The S&P 500’s forward price-to-earnings multiple is about 17.5 times currently.

  • Macy’s stock trades at a startling 19% discount to book value. Paging Warren Buffett.

  • Macy’s dividend yield stands at 8.6%, well in distressed company territory.

But hey, at least the Macy’s Thanksgiving Day parade is around the bend. Always a joyous occasion.

This article was updated on September 18, 2019 to reflect Marla Beck’s role as CEO of Bluemercury.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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