One of the biggest retailers, Macy, has been stumbling down in the past years due to the declining mall traffic and the rise of online retailers.
The most hard-hitting for the department-store company is the diminishing mall traffic punishing its revenue and earnings. Rumors spreading suggest a possible company sale after two years of fighting and flipping through the baskets of offers.
The retailer has been struggling to keep up with the online retailer's trend ever since their recent stardom, Macy has been losing more than half of its value since the mid of 2015, mall traffic being the major concern as consumers are opting for the online shopping experience. Analysts are expecting a 3% decline from the department store's 2016 fiscal; while earnings per share will also be stumbling by a third relative to $4.40 peak last 2014.
Macy Plans to Axe 10,000 Jobs
The Cincinnati-based company has been planning to cut off 10,000 jobs out of its total 157,900 workforces. Macy has been cutting a lot of expenses and this is one of the receiving lines, the termination of the employees frees almost $550 million in operations expenses annually and another step the department-store is taking is downsizing its physical stores. The company looks to ride the online shopping trend, as most of its competitions have been steep because of the shift in consumer shopping.
According to recent reports, Macy can potentially bump up its upside in the stock by 20%-30% with the focus shifting to its fast paced online business. A potential deal and collaboration from the much smaller competitor are a possible strength Macy can use as the bearish mall traffic continues. The process would lead to a centralized and concentrated profit for the department store industry; this can also potentially eradicate the smaller competitors making giant companies such as Macy on the receiving end.
Macy’s Real Estate Business Pulls the Company despite Low Mall Traffic
Macy has approximately 700 locations in the U.S., second only to J.C. Penny’s 1,000 store locations U.S. wide, along with this, Macy’s also sports a real estate company that is topping all the rest of its competition. The real-estate business is also dubbed as the biggest and best-developed e-commerce platform, making almost $2 billion in operating cash flow and $1 billion in free cash flow annually.
The platform can push Macy’s stocks to $45 to $50; it was at $31.99 last Friday’s closing according to recent reports. Macy’s property portfolio is on the line of $21billion dollars estimate, the retailer has reportedly 700 plus physical stores in the United States; this includes premium outlets at Bloomingdale’s outlets and its main store in New York City’s Herald Square; all are worth up to $21 billion, $12 billion of enterprise value, and $10 billion market cap.
Even with the bearish mall-traffic, Macy can still potentially rest for a profitable year sitting under the real-estate’s tremendous run; and with its smaller competition diminishing due to the stiffer consumer taste. Also, Macy’s continues effort on filling all the gaps in its online services can really provide a definite boost on the biggest department-store in the U.S.