Macy's (NYSE: M) May Have a Comeback In It

At first glance, Macy's (NYSE: M) might look like one of the last stocks you'd want to buy into. You can actually pick up a share for less than the cost of a combo lunch at Wendy's (NASDAQ: WEN). The place has been hit so hard by coronavirus that it might be out for good. But there are some other stirrings that suggest this may not be the story of a store on its last legs, but rather, a retail store comeback in the making.

Consistent, If Not Particularly Pleasant, Results

Looking at the last six months in Macy's stock shows why investors likely get a sinking feeling in their stomachs—and wallets—when considering further investment. While the company did hold a line rather nicely from late December to late February—the stock neither went below $15 or above $17 in that whole time frame, when fourth-quarter earnings looked bright—when late February hit, the company slipped as though on a patch of ice and careened down all the way to April.

Sure, Macy's got caught up in The Massive Indiscriminate Coronavirus Sales Event like a lot of other firms did, but Macy's ability to recover not only was but currently is, seriously in doubt. As regular as the company's stock price was back in January, it became about the same now, holding a line between $6 and $10 with that same startling consistency.

An Inconsistent Future Ahead

The consistency in Macy's stock price may be unsettling enough, but consistency isn't likely to be seen pretty much anywhere else in its operations for at least the foreseeable future.

For instance, the annual Fourth of July fireworks event that Macy's puts on in New York City is slated to go ahead, but with one key, and some might say disturbing twist. Instead of one major show, running roughly a half-hour, the show is now being split into several smaller shows. Starting June 29, the fireworks will go off at some time, in some location, in one of New York's five boroughs for five minutes at a clip, a move which will prevent assembly to watch.

Of course, the idea of explosions going off at random in New York City for five minutes a day over the course of a week might be considered terrifying rather than festive. Macy's involvement, therefore, could produce a negative halo effect, ultimately, and that could hurt the recovery.

Consistency in Macy's job pool will also be in short supply. The company recently announced plans to cut 3,900 corporate jobs, which represents around three out of every hundred jobs. The move is, naturally, a cost-cutting measure designed to give Macy's the resources it will need to restart the flagging retail operation. It expects to save $630 million over the course of a year with the job cuts. It's also lowered staffing in several other sectors, including those that you would think would be vital to providing a decent customer experience, including supply chain and customer support operations.

So Where's the Comeback?

Granted, the picture does not look all that bright for Macy's. We don't mention the looting of its flagship New York City store here because it happened about two weeks ago, but it certainly doesn't help matters. However, with all this tumult, two things become clear.

One, Macy's is ready to do whatever it takes to get itself back in fighting trim and being taken seriously as a going concern. It's cutting jobs, it's shifted its annual fireworks display to satisfy what might be called unreasonable government demands, it's making changes at pretty much every level, hoping to find something that actually gives the company a boost. This dovetails in wonderfully to a growing body of rumors that Macy's may be the target of an acquisition effort by Amazon (NASDAQ: AMZN), though some say that JCPenney's rapidly-closing operations may be the target instead. Barron's, for example, puts extra weight on Amazon to buy Macy's over JCPenney (NYSE: JCP) thanks to Macy's greater connections in apparel brands, among other points.

Two, the troubles that are common to mall-facing retailers—we've seen enough of those issues coming out of Foot Locker (NYSE: FL) and the Children's Place (NASDAQ: PLCE) to make that clear—will hit Macy's with no less force. Despite all of Macy's moves to save cash and draw shoppers, it's going to have the exact same problems it had back in January before all this coronavirus business began. It's still a physical-retail juggernaut that's not drawing much traffic to its web-facing operations, and that leaves it vulnerable to future virus-related lockdowns or just general bypassing of physical retail in general.

It would be hard not to at least take a flyer on Macy's stock, when a hundred shares can be had for less than $700 as of this writing since a comeback isn't out of line. This is especially true if the Amazon buyout rumors come to pass. Be prepared, however, for the comeback to never actually materialize.