Macy's sees green shoots of a fashion cycle

Yahoo Finance's Brian Sozzi breaks down why analysts are bullish on Macy's and the resurgence in denim.

Video transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. When we're looking for something for Brian Sozzi to talk about, where else are we going to go but good old Macy's? Brian Sozzi, analysts out today with some positive commentary on Macy's. How are we getting there? And how are you thinking about the story today?

BRIAN SOZZI: Well, that's why this one is even-- we're even talking about this one because it's not often you see any good news on Macy. So that's why this really caught my attention. My inbox from the fine folks over at Jefferies raising their first quarter estimates on Macy's. They are set to report in a couple of weeks along with the rest of the retailers, noting a couple of things. First and foremost, stimulus. It looks like stimulus will have played a pretty big role in Macy's and likely other retailers. We've been seeing this in the retail sales data. Also, looks like Macy's is playing in that stimulus check bonanza.

Also, the analyst noting more loyal customers at Macy's spending more on their rewards programs, so that's a good thing as well. And now this is not something the Jefferies team baked into their analysis, but something worth noting and what we have been hearing from the likes of a Levi's and other players in the apparel industry, a new fashion cycle starting to emerge. And what that basically boils down to is people buying dressier type clothing, whether they go back out to eat, whether they go out to the movies. The Jefferies team noting-- and it's something we've talked about here-- body types have changed during the pandemic, for better or for worse. People need to buy some new clothes.

In this case, it's also not just to going back out. People going back out need new clothes for their-- to go do these things. Trends have changed. First and foremost, [INAUDIBLE] wide-legged jeans are in. Now we haven't had wide-legged jeans in, in, what, 15 years back when "90210" was on TV and everybody was watching it, like me and Julie, not you, Myles. But those trends are now starting to play out. It could a big boost to the likes of Macy's and many other power players.

Worth noting here, though, despite this boom and despite what looks to be a good first quarter set-up for Macy's, Macy's shares are only-- they're down 5% over the past month. Nordstrom shares down about 8% over the past month. TJ Maxx up 4% over the past month.

JULIE HYMAN: You know, Brian, the problem is, even if people are following the trends-- and let me just be the first to say, wide-legged pants are not a good look for short girls like me-- they make us look even shorter. But in any case, even if there's a new fashion trend, even when people's body types have changed, that's still no guarantee that people are going to be turning to Macy's to replace their clothing.

BRIAN SOZZI: No, it doesn't. And Macy's-- listen, we can walk into a Macy's store today, and the fact is, they just don't do a good job. There's really no associates on the floor to help you with sizing, to help navigate what these new trends mean, how can you play in them. There's no help in these stores. That reflects them cutting, really, hundreds of millions in dollars of costs and canning and booting a lot of people out of the stores so they can protect their bottom line and maybe make a quarter for a change. But not a great shopping experience at the likes of Macy's.

But we are seeing a lot of apparel companies-- we've talked to Levi's CFO Harmit Singh recently. Denim sales are strong. Macy's noted that last week when the CEO Jeff Gennette presented at the JP Morgan Retail Conference. Denim sales in the first quarter for Macy's up 40%. So the play looks to be the apparel players, not necessarily the dying stores like Macy's.

MYLES UDLAND: Yeah, I mean, not that I've really ventured out and done anything in the last year or so that's required sustained exploration of whatever is left up in my closet, but there's something about the millennial dudes wearing the skinny jeans thing that doesn't feel like it's going to last post-pandemic, right? That feels like we're going to look back, and it's going to be like, mm, maybe those were a little tight. So maybe that's the [INAUDIBLE]

BRIAN SOZZI: You're an extra skinny guy, right?

MYLES UDLAND: I ended up-- god, what was it-- like, tailored is where they-- it was like, it would go slim, then skinny, then tailored would be the smallest one, at least at Bonobos. But again, another brand, I haven't shopped there in a long, long time because I mean, I got my sweatpants on as usual, as always.

JULIE HYMAN: 'Cause you gotta zip those pants. You gotta zip and button--

MYLES UDLAND: Yeah, I mean--

JULIE HYMAN: --those pants. Nobody wants to do that.

MYLES UDLAND: Why would I wear a hard pants when I'm just sitting here in slippers and sweatpants all day every day? And yeah, Sozz, you mentioned, the stock story. This thing was basically left for dead 18 months ago. So the stock is now back at that level. So I think you got a long way to go here for Macy's, trading in the mid teens, a stock that was, oh, let's say, $60 per share or so back in 2014 and 2015.