Data breaches seem to be all the rage these days. In just the past few months, Facebook (META 3.70%), Google (GOOGL 0.92%), Adobe (ADBE 5.95%), T-Mobile (TMUS -0.45%), Twitter (TWTR), LinkedIn (a Microsoft (MSFT 2.14%) subsidiary) have faced breaches of sensitive user data totalling into the billions of users. For the most part, these companies suffered more in the court of public opinion than on the Street. Each of them faced a slight sell-off during the affected news cycle and recovered soon after – even Facebook, which the media has chosen as the poster boy for privacy law and refuses to forgive.
Publicly traded retail stores don't necessarily face the same scrutiny in the stock market as tech companies for data breaches. Under Armour (UAA 0.85%) suffered no real damage to its stock price since its confirmed breach in March 2018 (the footwear and apparel maker's stock fluctuated for other reasons). Hudson's Bay Co (HBAYF) saw no real decline when subsidiary Saks Fifth Avenue was breached in April 2008. The Adidas (ADS 0.96%) breach of June 2018 might be blamed for a two-week loss of 9.18%. It recovered that loss in five weeks and now stands at a 55.34% premium off of that low.
A Breach of Trust
Why then, is mainstream media blaming Macy's, Inc. (M 2.14%) 9.35% slide on the data breach?
Macy's most recent reports to the market beat all analyst forecasts, and its shares fell 8.6% after that positive news. Let's call the news of the breach what it really was then – a timely excuse for bears to get rid of a falling star.
Despite the earnings beat, the twelve analysts covering Macy's still expect a 4% YoY decline in sales and a 17% fall in EPS for 2021. This actually represents a downgrade in sentiment before the positive earnings report. The gap in analyst price targets – ranging from $12 to $27 per share – showcase the uncertainty about the business. However, analysts also expect the traditional retail industry to decline at 4.2% per year in aggregate.
The real breach of trust, then, is anyone blaming the decline in Macy's stock on a data breach.
A Holiday Gift Grab
Like its counterparts in retail and tech, Macy's stock seems set to recover from the November 14th breach announcement. The stock is currently up 3.5% off its November 21st low.
The dividend currently stands at 9.97% but is Macy's a stock to own for many years? Maybe not. We've got two insider sells and no buys over the past three months. Could it be a buy-and-hold for the next year? That looks like a brighter proposition, and the company is giving away plenty of value to keep investors hooked. If you hold until 2021, the house fronts you about 19% of your initial investment to stay put. I love playing with house money, and this is about as close to free chips as the market gives.
Although the Amazonian-sized elephant in the room continues to tower over traditional retail, it may not be time to give up those American nostalgia stocks just yet. It's holiday season, and I'd hate to leave a gift unwrapped just because it got a little nick in the corner.