Macy's In 'Execution Phase' After Announcing Growth Plan; Credit Suisse Downgrades Stock

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After Macy's Inc M outlined its operations and merchandising strategies in August, Credit Suisse’s Michael Exstein believes the company is now in the execution phase.

Exstein downgraded the rating on the company to Neutral, with a price target of $40.

Execution Phase

“Macy's is one of the first major retailers to outline a strategy in order to cope with the many challenges confronting the company and the industry,” the analyst mentioned, while adding, “Historically, the stock has marked time as execution versus strategy takes center stage for investors.”

Related Link: What Do Macy's 100 Store Closures Mean For The Company?

The company had announced in August it would close several locations, while focusing on its leading stores and ecommerce. This marked a meaningfully change in strategy and the stock rallied 17 percent on the day of the announcement.

“August's announcement shows Macy's intentions for the next several years. The investors' focus now will shift to current sales patterns and implementation of the company's announced strategy,” Exstein stated.

Expectations For Rationalization

The analyst believes that rationalizing its store base was a strategic and necessary move for Macy’s, since it allows the company to adjust its fixed cost base for lower brick & mortar sales, as sales shift to the ecommerce channel.

This move was also needed to cut down on underproductive locations and improve overall sales productivity as well as returns on a smaller asset base.

Exstein expects the company to use the freed up capital for higher return investments, including renovating key locations, as well as for further share buybacks and/or increasing the dividend.

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Posted In: Analyst ColorDowngradesTop StoriesAnalyst RatingsCredit SuisseMichael Exstein
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