Macy's store closures: Ripple effect on retail brands?
JPMorgan raises its price target for Macy's (M) from $23 to $25 but maintains the retailer's Overweight rating. The analyst behind the call cites Macy's attempts to reposition itself for a turnaround, including better margins and sales growth.
Yahoo Finance Retail Reporter Brooke DiPalma joins Yahoo Finance to break down the latest developments for Macy's amid its announcement of 150 store closures.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
BRIAN SOZZI: JP Morgan's Matt Boss raised his price target on Macy's, $25 from $23. And he kept an overweight rating, which is comparable to a buy rating. For those taking notes at home, the JPM team has those bullish vibes after meeting with the CEO and CFO, saying the retailer is repositioning itself for better margins and sales growth for this year and beyond.
JULIE HYMAN: Do you understand this business?
BRIAN SOZZI: I understand a Macy's because I could drive to a Macy's. I know what they're doing. So, Matt Boss, really, one of my favorite retail analysts on the Street. And I really-- I find it interesting when he talked about these 150-store closures. Now, Macy's has not disclosed where these stores are closing just yet, only except two locations. What he notes here is that most of these 150 locations are pretty much awful, where Macy's is the lone anchor tenant inside of these malls that are dying.
And really, my critique here is for new CEO Tony Spring, who's been at this company for a long time, why haven't these-- closed these stores 10 years ago? I have--
JULIE HYMAN: He was been there, but he wasn't running the show.
BRIAN SOZZI: But he's decision-maker. And I have a Macy's by me on Long Island. There's nothing left to this mall. There's a Macy's out in Long Island, Massapequa, with a sign out in front--
JULIE HYMAN: Well, maybe that's one of the ones they're closing.
BRIAN SOZZI: We're still open. I hope they do close it because I think the whole mall should be bulldozed, and something else should be put there that is more economic growth friendly. The point being, these stores are not making any money.
JULIE HYMAN: Well, you've got a lot of opinions today, Sozz. What would you put there instead of the mall?
BRIAN SOZZI: I think it should be a stadium, a sports stadium. In my--
JULIE HYMAN: Who's playing there?
BRIAN SOZZI: Anybody. But the point is, there's a lot of space there in Massapequa where that Macy's is, and it's just not--
JULIE HYMAN: You are--
BRIAN SOZZI: All right, we're fired up.
JULIE HYMAN: [INAUDIBLE] something today.
BRIAN SOZZI: All right, let's bring in Yahoo Finance's Brooke DiPalma into the mix. Brooke, I don't know how you're going to follow that one, but I know you've been covering the Macy's situation very closely, and you've been digging into this Matt Boss note.
BROOKE DIPALMA: Yeah, good afternoon to you both. Quite the hyped up crew here we've got on set, but definitely taking a deeper dive into what exactly this means for brands. Brands hoping that maybe that Massapequa stall is actually-- store is one of the good ones to move forward with. JP Morgan definitely dove into what exactly closing these 150 stores and leaving open the 350 stores means for brands like Ralph Lauren, like PVH, Levi, and Tapestry.
And initially, you know, JP Morgan really saying here that this protects the long-term viability of the entire store fleet, while also allowing for reinvestment in those go forward locations--
JULIE HYMAN: Yeah, it's basically--
BROOKE DIPALMA: --in alignment with these vendor partners--
JULIE HYMAN: Yeah, it says they want them to do this.
BROOKE DIPALMA: [INAUDIBLE] doubling down on those top performing stores. These vendors really hoping to hopefully get rid of those-- what Matthew Boss called those tail end stores, those tail stores, and really double down on the stores that have those top performing vendors and brands, those top selling [INAUDIBLE].
BRIAN SOZZI: You know what should go in those stores? A big [? Temu ?] warehouse manufacturer. There we go. Right there. [INAUDIBLE]
JULIE HYMAN: Basically, what he's saying is that those-- it's in those vendors' interests.
BROOKE DIPALMA: Exactly.
JULIE HYMAN: They want them also to close the doors. I also thought it was interesting that Matt Boss made the point that, you say, why didn't this happen earlier? He's saying that this was in the works even before Macy's came under activist pressure.
BROOKE DIPALMA: Yeah, and CEO Tony Spring said to Yahoo Finance, this ongoing, bold, new chapter strategy has been going on, has been in the works for more than six months. We know, though, that this activist shareholder, Arkhouse Brigade Capital, coming in with that $6.6 billion bid.
And many on the Street saying that Macy's is really seriously considering it here. Some even saying that Tony Spring will stay as CEO under this deal. And when we spoke to Arkhouse, they're really looking at it as both retail and real estate. That also caused lots of skepticism about what Arkhouse's real intentions here. They're telling Yahoo Finance they want both sides of the business here.
