Please ensure Javascript is enabled for purposes of website accessibility

Why Macy's Stock Plunged 60% in the First Half of the Year

By Jeremy Bowman - Jul 7, 2020 at 10:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the department store chain dove as it was severely hit by the pandemic.

What happened

Macy's (M 0.96%) shares fell 60% in the first six months of the year, according to data from S&P Global Market Intelligence, as the company was hit hard by the coronavirus pandemic. The department store chain was forced to sharply cut back on expenses, take on more debt, and pause its turnaround as stores closed for several weeks. Looting at several of its stores also added to the company's challenges.

As you can see from the chart below, the stock tumbled when the pandemic started -- and it has not yet recovered.

^SPX Chart

^SPX data by YCharts

So what

With a heavy real estate footprint and a business largely dependent on apparel sales, which come with a distinct set of challenges during the lockdown, Macy's is struggling to manage its way through the crisis. 

The Macy's Herald Square store

Image source: Macy's.

The year started off uneventfully as the company announced a three-year turnaround plan in February, but the stock fell sharply as the coronavirus threat hit the market. By mid-March the company had closed all of its stores, accessed a $1.5 billion credit facility, suspended its dividend, and cut non-essential operating costs. The company acknowledged that the pandemic was taking a "heavy toll" and it took a number of steps to shore up its financial position, including furloughing store-level workers to survive the crisis.

By June, the company had raised $4.5 billion, including $1.3 billion in debt at an 8.375% interest rate, a steep price to help it stay solvent. Its first quarter earnings report was delayed until July, and the numbers were ugly. Revenue fell nearly 50%, and Macy's posted an adjusted net loss of $638 million. It also took a goodwill impairment charge of $3.1 billion. The company also said it would lay off 3,900 corporate and management staff.

Now what

There was some good news, however. Management said that sales at reopened stores have been stronger than expected, and that it expects to exit the second quarter in a clean inventory position. The business appears to be steadily improving, but with a resurgence of coronavirus cases, the company's recovery may be put on hold.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Macy's, Inc. Stock Quote
Macy's, Inc.
M
$17.84 (0.96%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.