On Thursday, TD (TSX:TD) Cowen adjusted its stance on Macy's (NYSE:M) shares, downgrading the stock to Market Perform from Outperform and reducing the price target to $20.00 from $23.00.
The retail giant, known for its department stores, is undergoing significant changes, including the closure of 150 locations. In contrast, it is expanding in the luxury segment with 30 new Bluemercury shops and 15 Bloomies, as well as increasing its small format stores by 30.
The firm acknowledged the positive steps Macy's is taking, such as its strategic store adjustments, growth in the luxury market, and improvements in private label and inventory management.
Despite these strategic moves, the firm pointed out that the materialization of benefits from these changes would require time. It also highlighted several challenges that could cap the stock's short-term growth potential. Among these are the company's flat comparable store sales (comp) guidance, which remains unimpressive despite a resilient consumer environment.
Another concern for Macy's is the potential increase in credit card losses, which could impact its financial performance.
Additionally, the retailer faces the critical task of becoming more relevant to younger consumers, a demographic that is vital for long-term retail success but has been elusive for many traditional department store chains.
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