I have been actively tweeting on Macys on my twitter account, @PlatinumRic.
The stock pays a 10% dividend that is secure; has financial girth, and in its real estate and brand has lots of optionality. The Barrons article this weekend, acknowledging its financial strength, but questioning its business prospects, created a buying opportunity again below $15 this morning. I added to my position.
There is no question that Macys, at best is lackluster, and in reality when I have been in the stores, it feels like death warmed over. Certainly it is a remarkable contrast to the life and entertainment and excellent access to service that one experiences in a Target, often next door in the same mall.
When Mark Tritton left target to join Bed Bath and Beyond, BBBY took off and for good reason. I expect the same kind of thing will happen to Macys, and that Jeff Gennette, Macys' CEO, does not have the ability to reinvigorate this business.
Ultimately, I expect an activist will take a run at this company. Its market cap is under $5 billion, with an enterprise value of $11 billion, while Target is $65 billion. Obviously, today, these two companies are very different businesses, but Macys does have an enormous asset base, and lots of upside potential if the stock is "reimagined" with a new CEO. No, I haven't heard any discussion about this, and Jeff has done "ok" on the financial side; but it strikes me that he just doesn't have the ability to create the relevance and excitement that is essential to bring Macys back to life.
Anyway, I now have a full position in this stock. As much as I have enormous respect for Jim Cramer, and always learn from him, I disagree with his characterization of Macys as being similar to an MLP, where, effectively, it just pays a big dividend but has no upside. In point of fact, I see upside not only in the value of such a high and secure dividend, but in the plethora of options available to recreate this company, under the right leadership. The negatives are in this stock, and there is terrific optionality, in my view, on the upside!
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