On Tuesday, corporate bond research firm Gimme Credit maintained its Underperform rating on Macy's (NYSE:M), stating that the retailer has shown signs of progress as it prepares for the summer season, with higher markdowns leading to a better inventory position.
The firm notes that Macy's Go-Forward stores and First 50 locations have demonstrated sales performance that aligns with the company's aspirations of achieving low-single digit comparable sales growth and mid-single digit adjusted EBITDA growth by fiscal 2025.
In addition, Gimme Credit says that fiscal 2024 is being approached as a year of transition and investment for Macy's, with the company in the process of implementing its Bold New Chapter plan, which includes the closure of 150 underperforming stores.
"There are early signs (First 50 locations) that management's new concepts may be working," says Gimme Credit. However, they caution that despite these positive developments, Macy's continues to encounter challenges, including pressure from activist group Arkhouse Management, which now holds two board seats and has suggested a potential buyout of the company.
"Macy’s outlook assumes consumer spending will remain under pressure for the balance of the year," adds the firm. "Our biggest concern is the risk of a less than soft landing for the U.S. economy that would likely delay efforts to grow sales and expand margins. The 5.875% senior notes due 2029 yield 6.6%. Remain underperform with limited downside."