Will Off-Price Retailers Eat Macy's Lunch?
Just six years ago, Macy's (NYSE: M) seemed like an unstoppable cash-generating machine. However, since fiscal 2014, its revenue has gradually receded while profitability has plummeted. Contrary to popular belief, the rise of e-commerce hasn't been Macy's biggest headwind. Rapid expansion by off-price retailers like TJX Companies (NYSE: TJX) has been a bigger headache.
Both department stores like Macy's and off-price retailers were hit hard by the COVID-19 pandemic earlier this year, but the off-price segment is recovering much faster. As a result, many investors and analysts expect it to win the recovery, a result that would further marginalize Macy's. While there's something to be said for that theory, Macy's may be more competitive than many people believe.
Macy's earned a $2.5 billion adjusted pretax profit on revenue of $28.1 billion in fiscal 2014, up from an adjusted pretax profit of less than $1 billion on $23.5 billion of sales just five years earlier. Alas, it has been all downhill from there. By fiscal 2019, sales had slumped to $24.6 billion, and adjusted pretax profit had fallen back to around $1 billion.
Source Fool.com
