It could be lights out for Macy’s (M) if America goes through a second wave of the coronavirus.
“I think that the majority of retail is going to have a tough time surviving another major shutdown. I don’t know we’ll get one nationwide. If the consumer becomes fearful again of going into a mall or being in an enclosed space, you’re going to see the reaction that we saw in Texas. with the sales moderating. Again, even if we don’t there are a limited amount of bodies we’re allowed to have in stores going forward. It changes the dynamic of the holidays. So are we going to have Black Friday? Those big sales where people trample one another?,” said SW Retail Advisors founder Stacey Widlitz on Yahoo Finance’s The First Trade. “I don’t think we can have that this year. It does change the dynamic of shopping, particularly for a name like Macy’s.”
For its part, Macy’s has tossed almost the entire kitchen sink at trying to survive the pandemic.
The company has launched curbside pickup. It has raised close to $4.5 billion in new high interest rate debt to shore up its balance sheet. It’s in the process of closing more than 100 lagging stores. And more recently, Macy’s said it would fire 3,900 corporate workers in a bid to save $365 million in costs this year and more than $630 million annualized.
But, investors remain gravely concerned about the outlook for Macy’s. Shares of the department store have crashed more than 61% year-to-date.
Meanwhile, Macy’s first quarter earnings release on Wednesday — delayed because of the COVID-19 pandemic — did little to engender confidence in its outlook.
Macy’s first quarter sales crashed to $3 billion from $5.5 billion a year ago as stores were mostly closed during the quarter. The company lost an eye-popping $3.6 billion on a net basis. It was forced to take a $3.1 billion asset impairment charge, likely reflecting reduced expectations around sales and profits post pandemic.
The company ended the quarter with about $7 billion in combined short- and long-term debt compared to a mere $2.7 billion in shareholders’ equity.