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The Bleak History of Macy’s Is Coming Back to Haunt It

If history repeats itself, you must sell Macy’s stock now

Despite the pain and uncertainties of the novel coronavirus’ impact on the economy, we can surmise one thing: In every sector, there will be winners and losers. That’s the case even for markets that are as embattled as retail, particularly the clothing and accessories segment. Recently, I gave my thoughts on Nike (NYSE:NKE) as a potential victor once the economy opens. Macy’s (NYSE:M), on the other hand? If the bloodbath to start this week is any indication, M stock is in serious trouble.

The Bleak History of Macy's (M) Stock Is Coming Back to Haunt It
Source: Osugi /

Obviously, the numerous shelter-in-place orders have done nothing to help the cause. Understandably, many citizens are fed up with the mandatory quarantines and it’s not just about cabin fever. Livelihoods depend on an open, robust economy. With millions of American families stretched to their financial limits, I think we can all sympathize with their frustrations.

However, some states may have to endure these stay-at-home orders for longer than they like. Furthermore, some Harvard scientists expressed concerns that we may have to practice social distancing protocols until 2022. If so, that would impose a negative impact on M stock.

As a higher-end fashion and accessories retailer, the department store giant depends on foot traffic — a mainstay component of retail that’s becoming steadily irrelevant due to e-commerce. Moreover, when the coronavirus struck, Macy’s was transitioning toward its spring and summer collection.

Depending on the length of key state shutdowns, the retailer may have to sit on massive amounts of inventory.

Plus, international travel demand is down big. Without tourism, Macy’s flagship stores will receive noticeably less revenue. And that’s not exactly a recipe for success for Macy’s stock, which needs any help it can get.

For M Stock, It’s a Trip Back in Time That No One Asked for

If the plight regarding M stock sounds familiar, it’s because it is. Back in 2015, the retailer disclosed awful results for its third quarter, sending shares plummeting down to earth. You might even say that it was the beginning of the end.

For both profitability and growth metrics, the company came up short. To be fair, though, much of the sales declines came from an unexpected event. Warmer-than-usual weather hit the northeastern part of the U.S., curtailing sales for winter apparel.

Because of this surprise development, Macy’s had no choice but to offer steep discounts, impacting profitability. Ultimately, though, that didn’t move the needle for Macy’s stock. At one point in July 2015, shares were trading above $70. Since then, they’ve never come close to this all-time high.

If that wasn’t bad enough, management reported a decline in traffic from international tourists. For M stock, this is huge because the domestic market has gradually shifted toward platforms like Amazon’s (NASDAQ:AMZN) flagship website. But with tourists, part of the fun is physically being at a point of interest.

Looking back, it’s almost as if 2015 was a prophesy not to buy M stock. Because today, we’re witnessing the same headwinds but with greater severity.

First, the company’s current inventory crisis was not caused by a weather event but rather a pandemic. Due to the unprecedented response, some retailers may face a permanently negative change to their business.

Second, international tourism may not return to pre-coronavirus levels for some time. Of course, eventually, pent-up demand will spark tourism, especially if airliners continue offering attractive discounts. But it may not arrive soon enough to save this beleaguered and increasingly irrelevant department store.

Bleeding Consumer Interest

According to Statista Global Consumer Survey 2018, U.S. consumers who shopped at Macy’s mostly comprised of the 30 to 49 years demographic (42.07%). In second place was the 18 to 29 years demographic at 37.4%.

As a retailer, that’s what you want to see. The older demographic provides the spending power to purchase big-ticket items, while the younger demographic provides the hype.

Unfortunately, there’s just not enough repeat business to keep investors interested in Macy’s stock. Contrary to Nike, M shares have an inverse relationship with the labor force participation rate of prime working age adults (25 to 54 years).

Macy's stock vs labor force participation rate
Click to Enlarge
Source: Chart by Matt McCall Research Team

For M to get its mojo back, it will have to reverse this trend. Unfortunately, I don’t see that happening. If you think about it, there’s nothing truly special about Macy’s. Brick-and-mortars are going out of style and that’s a megatrend that won’t regress.

If you’re looking for a discounted opportunity amid this crisis, plenty of viable names exist. However, Macy’s just isn’t one of them.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.

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