Macy’s Inc (NYSE:M), like every other department store in this country, is suffering from the ongoing downsizing of brick-and-mortar retail. Down 34% year-to-date, M stock has little hope of making up those losses by the end of the year.
The company announces its second-quarter earnings before the markets open Thursday, August 10. Both revenues and earnings are expected to be lower than in Q2 2016 with analysts estimating earnings-per-share of $0.46 and $5.5 billion in revenue.
Short-term, there appear to be few if any catalysts to drive Macy’s stock. Long-term, however, there are three levers Macy’s has at its disposal that can push its stock higher in the coming quarters.
Macy’s: Three Things to Look For
Macy’s is taking some of its unused parking-lot space and repurposing the real estate so that it’s a revenue generator rather than an empty space.
The company’s partnership with Brookfield Asset Management Inc (NYSE:BAM) will see at least 50 of its 841 stores undergo a parking-lot makeover. Possible additions could include restaurants, office space, hotels, condos and more.
Brookfield already is a big player in retail real estate owning 35% of GGP Inc (NYSE:GGP), America’s second-largest mall owner. Also, it’s one of the world’s biggest owners of infrastructure assets. It understands big projects.
“Regional shopping centers are horizontal assets with large parking footprints which can allow for great creativity in the redevelopment process,” Brookfield CEO Bruce Flatt told Forbes in May. “We are finding significant opportunities with continued urbanization to add multi family residential rentals, condominiums, hotels and office uses to these large pieces of real estate.”
Although Flatt was specifically talking about GGP malls, the same principle applies to M’s real estate. Redevelopment of these lands not only provides an excellent return on investment, but it also improves the malls that get these makeovers, which in turn strengthens the Macy’s store at this location.
M might be suffering from revenue shortfalls, but its real estate still holds plenty of value. Patient investors will be rewarded from the repurposing of its real estate.
In early June, M announced that Yasir Anwar had been promoted to executive vice president and chief technology officer. In his role as CTO, Anwar is responsible for making Macy’s online experience a good one for its customers.