The last thing that most brick-and-mortar retailers needed was an order for people to stay home. And the weaker the retailer, the less such an order was needed.
Macy’s Inc. (NYSE: M) has been struggling for years, with the share price dropping from more than $52 a share to right around $6 currently. The company has closed virtually all its stores and furloughed about 123,000 workers as it tries to survive the impact of the COVID-19 pandemic.
According to an exclusive report at Reuters, the venerable department store has hired investment bank Lazard to help with financing but that no debt restructuring is currently being discussed. Reuters cited unnamed sources in its report.
In addition to sending all its workers home, Macy’s has suspended its dividend, drawn down its credit line, stopped spending in a number of areas and cut management pay.
Late last month, Moody’s Investors Service downgraded Macy’s senior unsecured debt rating from Baa3 to Ba1, the top of the junk ratings. Moody’s Vice President Christina Boni said:
The disruption and negative effect on consumer demand as a result of COVID-19 will require Macy’s to refocus its efforts toward priortizing the preservation of liquidity and delaying its strategic plans to improve its operating performance.
When the company reported fourth-quarter and full-year results in late February, quarterly comparable sales for owned stores decreased 0.6% year over year and on an owned-plus-licensed basis, comparable sales decreased 0.5%.
Macy’s also said the cost of its transition price rose from $400 million to $420 million, of which $318 million was recognized in 2019. The remaining spending was planned to be recorded this year and essentially all of it was cash.
Macy’s also updated the estimated total costs related to its Polaris transition plan to approximately $400 million to $420 million. In 2019, the company recognized Polaris-related costs of about $318 million, of which $161 million were noncash impairment charges associated with store closures and campus consolidations and $157 million were cash costs related to restructuring activities. The remaining costs to be recorded in 2020 are expected to be cash.
Shares are down more than 8% early Monday, at $6.10 in a 52-week range of $4.38 to $25.76. The company’s market cap is around $1.9 billion, and in a different world than the one we live in today, private equity firms might be lining up to make offers to acquire Macy’s. The company owns 342 of its stores outright and has ownership interests in 113 more of the total 775 stores it operated at the end of 2019. But even as commercial real estate, now is not a good time to be a buyer.
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