Macy's is one of the best known retail names in the United States. The department store giant was the destination for many generation of American women. It is also one of the flagship stores in many shopping malls around the country.
Even before the shut down due to the coronavirus, the chain was struggling. Like many other retailers, we are seeing the events of the last two months absolutely decimate company numbers. It reported that revenue fell 45% in the first quarter while it could lose as much as $1 billion in the present quarter.
Like other retailers, Macy's is looking to strengthen their balance sheet. This only makes sense as earnings are taking a hit. The CEO already stated that he sees Macy's as a "smaller" company in the near term.
The bond offering looks to retire debt that comes due in 2021 and 2022. That will put the new debt maturity out to the middle of the decade.
Of course, the rating agencies were quick to downgrade Macy's debt.
It is going to be tough for Macy's to solve their issues. One of the core challenges the company faces is that its customer base is aging. The company failed to reach this generation of younger women, unlike in the past. Many companies are facing the same dilemma as a new mindset took hold. The rise in online shopping has decimated the retail sector.
One advantage that Macy's does have is that the brick and mortar sector is going to be smaller going forward. Many of Macy's competitors are starting to succumb their issues. There are still millions of Baby Boomers and Gen Xers who still frequent retail locations. While it will delay the inevitable, it could allow the company to get back on its feet.
Restaurant and retail stores are expected to join the airlines as slow to recover with the economy reopening. People are hesitant to return to their same behaviors as before. At the same time, there is the financial burden that many Americans are feeling. With more than 35 million filing first time unemployment claim, the employment picture is bad. It is estimated that Americans lost more than $1.3 trillion in wage over the past two months.
Macy's still have a long way to go to shore up the balance sheet enough to make many investors feel comfortable. Years of bleeding cash is catching up to it.
Like many companies, the shut down of the global economy has shown a spotlight on their warts. Macy's is in rough shape although faring better than some of its competitors.
This might turn into survival and the last chain standing.
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