Investors are treating Macy’s retail operations like they’re worthless
“Stripping out Macy’s-owned real estate and adjusting for incremental lease expenses essentially assigns no value to the retail operations.”
How much is Macy’s worth?
It’s a question that can be answered many different ways.
You can look at its book value, the difference between its assets and liabilities, and say it’s worth about $4.6 billion. Or you can look at its market cap, the total value of all shares outstanding, and say it’s about $3.8 billion. And so on and so on.
When you slice and dice various metrics and still want to get a sense of “how much value does the market attach to the company’s ability to make money by selling clothes and home goods?” you might arrive at a very disturbing answer.
That’s because Macy’s enterprise value — that is, its market cap plus its total debt less cash and cash-like assets — is less than the projected worth of its real estate holdings, per Bloomberg Intelligence.
“The dark value of Macy’s real estate holdings — the estimated worth of properties if vacated — could be near $6 billion, based on our calculations, more than the enterprise valuation of $5.3 billion derived by using its recent share price,” Bloomberg Intelligence Senior Analyst Mary Ross Gilbert wrote. “Conversely, stripping out Macy’s-owned real estate and adjusting for incremental lease expenses essentially assigns no value to the retail operations.”
Gilbert notes that Macy’s ratio of real estate adjusted enterprise value to forward earnings before interest, taxes, depreciation, and amortization is -0.8x (a valuation so low as to imply extreme pessimism on the business’s prospects, even though it’s still been making money), while for peers like Kohl’s and Nordstrom, this metric is at 0.8x and 4.0x, respectively.
Shares of Macy’s briefly hit their lowest level since 2023 last week after the company did what nearly every retailer has done this reporting period: post better-than-expected quarterly results but a dim outlook for the year ahead.
“Its revitalization plan — optimizing apparel assortments with more stylish brands, adding more service to shoes, ready-to-wear, and dressing rooms — is showing green shoots, but net sales are likely to remain pressured until it can be applied to the entire store base,” Gilbert added.
