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Why Macy's Rose as Much as 11% Higher on Friday

By Eric Volkman – Aug 14, 2020 at 6:58PM

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Is there some indication that the troubled retailer is finally turning things around?

What happened

Macy's (M 7.52%) closed Friday 3% higher, after a sprightly day on the stock exchange. The optimism for what has been a very out-of-favor company seems to be due to the Commerce Department's latest set of retail sales data published that morning. 

In July, the data show, retail sales increased 1.2% over June. While this was well under the 2.3% estimated by economists and significantly lower than the previous two monthly improvements, it nevertheless indicates that consumers are still determined to shop despite the threat of the coronavirus pandemic.

A Macy's store in San Francisco.

Image source: Macy's.

So what

If auto sales were stripped out of the equation, the growth figure would be 1.9%, well ahead of the expected 1.2%.

That's balm for Macy's and many peer retailers that still have a strong brick-and-mortar presence, as they have suffered two terrific blows in recent years. First, there is the Retail Apocalypse brought on by increasingly powerful online rivals, chiefly Amazon.com.

No. 2 is, of course, the coronavirus pandemic. Although Commerce's recent numbers show that people are spending despite mandated closures and forced or voluntary stay-in-place measures, big retailers like Macy's are still taking substantial hits to their business due to severely reduced customer traffic.

Now what

Stagnating annual revenue and thin-to-nonexistent profits indicate that Macy's continues to struggle mightily to keep its head above water. The company's physical store footprint remains large, keeping expenses high and strategic options limited. The latest retail data is encouraging, but probably not encouraging enough to buy this company's stock.

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Macy's, Inc. Stock Quote
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