Macy's ($M) DD A Long Play with potential 2X+ Gains

Macy’s ($M), despite its insane price increase the past year (300%+), is still undervalued and has potential catalysts lined up to unlock the true value of the company. Active investors have recently urged executive management to accelerate the digital transformation of the company via E-Commerce spinoffs and unique partnerships that would push a market cap of at least $15 billion (~$55 per share) based on their projections. Additionally, market sentiment and short interest add greater confidence to why these values could be hit.

Macy’s (M) Overview and Fundamentals

Macy’s, Inc., an omnichannel retail organization, operates stores, websites, and mobile applications under the Macy’s, Bloomingdale’s, and Bluemercury brands. It sells a range of merchandise, including apparel and accessories for men, women, and kids; cosmetics; home furnishings; and other consumer goods. It operates in the US and Dubai, UAE, and Al Zahra. Important Fundamentals below (Pulled from Yahoo! Finance, Fidelity, and Zack’s Research):

Sector: Multiline Retail (In parentheses for sector median comparisons)

P/E (TTM): 18.98 (18.94)

Price to Cash Flow (TTM): 6.57 (14.2)

Price/Book: 3.58 (11.28)

Price/Sales (TTM): 0.43 (1.43)

PEG Ratio: 0.68 (0.94)

In bold I have what I find as the confidence in the company from a fundamental standpoint that the price will be rising significantly and support why it is undervalued despite being at a 52-Week high. Also, I’m a big proponent of using Price to Cash Flow for evaluation compared to P/E, although P/E is still useful and reign supreme for non-tech in my opinion.

You can see the EPS and 5-Year chart below, using 5-Years because I’m more interested in pre-pandemic price range.

The most striking thing in my mind is that they got wrecked by COVID like many other retail stores despite solid EPS prior, to the point that they may have already been undervalued. Notice though that the past 5 quarters not only have they beaten the estimated EPS, they’ve blown past it especially 2Q of 2021 showing an exceptional recovery. How could this be? Anyone who followed GME knows what E-Commerce and a legacy consumer base can do for you. Overall, the fundamentals look to me like it has significant growth metrics that aren’t being factored into its price despite being at a 52-week high.

The Polaris Strategy and Active Investor Pressure

As mentioned previously, GME was able to fall back in favor with the street by laying the groundwork for transition to E-Commerce via digital transformation (even if by accident prior to Cohen). The Polaris Strategy was filed in February of 2020 (right before politicians pulled out their stock as the market was priming to flash crash) so Macy’s C-Suite already knew transition into E-Commerce was a must. The Polaris strategy has a bunch of other initiatives, but see the excerpt below for their E-Commerce and digitization goals:

“The company has a scaled and growing digital business across its brands that generates more than $6 billion per year in sales. contributes to overall operating profit, and the company will continue to invest in its websites and mobile apps to deliver a superior fashion experience, accelerate growth and further strengthen profitability.”

Along with this, Macy’s is planning and still implementing the consolidation of lower-tier stores in malls to generate additional cash in their move to E-Commerce. There’s tons of promising info in the Polaris strategy which if you’re curious you can delve into here (

Sounds all well and good, investors should be happy that their company is taking strides for growth and modernization, right? Well, this is where my optimism peaked and I went from watching to going long. Activist Investor Jana Partners recently took a stake in Macy’s and urged them to spin off an individual E-Commerce company (read here: They valued a Macy’s E-Commerce spinoff at $14 billion despite the market cap of the total company back then to be $7 Billion (~$23 at the time) and $9.52 Billion at the time of this writing. Macy’s eventually came out and basically said no we’re good, we’ll stick with the Polaris strategy. Jana Partners is a heavy hitter though, they were able to convince Whole Foods to merge with Amazon, and I’m sure they are not done trying to persuade Macy’s board. This value can be rooted in the recent valuation of Sak’s E-Commerce spinoff which initially was 2X the company sale which was $2 billion; 8 months later, Sak’s E-Commerce spin-off is now valued at $6 billion, triple the perceived initial value which Jana Partners is stressing to the board. Macy’s is expecting sales of $24 billion was likely what struck Jana Partners interest in the untapped value of an E-Commerce spin-off.

This past month, things got even more interesting on the active investor front. NuOrion, who I admittedly have not done much research on but has had a stake in Macy’s for a bit, doubled down on Jana Partners’ call to the board by publishing an open letter regarding on action that needed to be taken immediately regarding the digital transformation and also providing interesting strategies for the companies excess space. NuOrion stressed similar sentiment regarding Sak’s valuation and even brought up that Macy’s is trading around 0.6X its enterprise value. Where NuOrion brings a bit of a unique perspective is that they are pushing to Macy’s to get ahead of the game and start accepting crypto payments, and teaming up with EV companies such as Tesla to model cars on their shop-floors (Especially in NYC) and use their excess parking lot space to act as EV charging stations. NuOrion proposals are bit more daring and possibly can be disregarded, but it seems like investor sentiment in the company is favoring significant changes, see an excerpt from Barron’s (paywall unless you have Fidelity) on one large shareholder’s thoughts:

“At first glance, the recommendations may look like attempts to force Macy’s (M) to cash in on the latest buzz. But one large Macy’s (M) investor Barron’s spoke with notes that the ideas represent the unconventional thinking the department- store chain should consider to navigate a challenging retail landscape.”

Lastly, I will end this section by mentioning that NuOrion believes these changes could bring Macy’s stock price to at least $75 at its current float and link the letter to investors here (

Short Interest

Not much to add to say in this section, just info below in the table. Appears that like many of these retail chains, shorts were betting on bankruptcy like JCPenny, but Macy’s withstood the storm and there’s still shorts outstanding. I’m not looking at this play as a short squeeze, but the info is probably more valuable to most of you than it is to me in understanding its potential:


309.06 M



SI% of Float


Institutional Ownership


Position and What I’m Keeping an Eye On

Currently, I own 20 call options at a strike of $40 expiring Jan 2023 bought at an average price of $1.21 along with 100 shares at $30.85. I’ve been selling cash secured puts and covered calls weeklies. Moving forward, I’m looking at continued growth in E-Commerce, Jana Partners increasing their position to wield more power to force changes if necessary, holiday sales as they’ve recently took on some of Toys R’ Us’s(?) inventory, and continuation of sticking to the Polaris Strategy, which was actually realized today when they raised their minimum wage to $15.00/hr and are providing educational assistance to their employees.


It was suggested in the forum I do a DD and post it on here regarding a comment I made on Macy’s so that was my motivation. FYI, my first DD ever, criticize away, I appreciate feedback from Value Investors and those who understand Technical Analysis and Fundamentals more than I do. Not financial advice, just for education and discussion purposes. If anyone has TA analysis they’d like to look into that’d be great, I am not savvy at all on that end. I’m having trouble so formatting is off and images aren’t loading, I can update in the following days to include the charts and EPS growth.


I think there is potential for this to be undervalued or atleast on a path to a stronger company. Might be an ER play.

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Yea I think the fundamentals above make it undervalued, also, forward P/E is below 10 on Yahoo Finance. I think there is a chance that we’ll be hearing guidance updated with higher targets in tbe coming earnings reports. I don’t know how to play earnings well but the Dillard’s and Kohl’s earnings are providing me optimism they’ll have a good one coming up.

I’m not sure how much faith I have in the “use parking lots as EV charging stations and display EV’s in stores” angle that NuOrion put forth, but I can definitely see value in the Jana proposal of a spin-off.

I’d be interested to see some internet traffic comparisons on them vs competitors (Kohl’s maybe?).

I agree with @Rpgeek that there is likely some ER potential here.


Thanks for the response, I agree, the whole EV charging station is is very outside the box but not necessarily a guaranteed good idea. I’m most intrigued by the large shareholder’s response in the matter, his indication that those who are long welcome active investor guidance could lead to willingness to help facilitate pressure on the board. I’m more intrigued by JP’s vision and very optimistic they won’t be so polite next time.

Crossed oversold indicators for me this morning so took a position at 30.26. Thanks for the call out.

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Thanks for the DD. Do you have January 2022 or January 2023 calls? You said you paid $1.21 for the latter but they are now valued thrice that.

Also, in terms of the next few weeks, are there any potential catalysts?

Hey thanks and yea I got them for 2023 but the share price was 23 dollars at the time with weaker IV.

Honestly this earnings could help catapult it a good bit, the TTM P/E will be calculated with 4 positive earnings so there might be some algo trading to help out. If they continue to crush earnings especially holiday season with the addition of Toys R’ Us products it could keep momentum. Aside from earnings, the active investor engagement is really promising and a continued push by active investors especially Jana Partners (say, buy more stock, force the boards hand, etc.) Could push it.

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Appreciate the write up!

I’ll personally be playing earnings.

Reading their past ER, it looks like they’re continually growing and expanding into the digital space (which you covered). I did some digging around, and Macy’s has one of the highest intent-to-buy on their app among retailers for the upcoming holiday season, which I believe can drive them to not only beat q3 but also increase forward guidance for q4:

Another tid bit @Fash shared is they’ve made considerably more hires in the engineering department while reducing their sales (retail workers), based on LinkedIn data:

Everyone memes that malls are dying, and they probably are. That being said, they’re crushing it on the digital side of things and look to be investing further into their ecommerce platform, unlike their typical competitors.

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Awesome thanks see below for internet traffic of comparable companies. Take note, Kohl’s and Dillard’s just had really good earnings that they credited to ECommerce and Dillard’s internet traffic wasn’t anything special. Additionally, for longer play outlook, Saks spinoff is valued at 8 billion despite in my opinion having the weakest internet traffic here.


Here is some foot traffic data I pulled for the last four months. It’s 86 stores (out of 517 total). Nothing incredibly exciting. A small uptick in people in the stores for the month of August. Bear in mind that these values are not the total people who visited the stores, just a sample size. But it still is valuable to see overall trends.

This graph is just the counts broken down by dwell time, aka how long people spent inside the store. Less than 5 minutes, they are just passing through. >240, they are probably employees.

I’m not sure if these numbers are even “good” numbers. I’d have to compare them to similar store types. As most have said, I think their earnings will really hinge on the ecommerce side.


Earnings are on November 18th 2021

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Another data point, twitter data bullish


Thanks! What are the column headers for that out of curiosity? I like the green just not sure what each thing is indicating

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Earnings will be released today before market open

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Went ahead and sold today at 37.20 about 23% gains. Expect to see some profit taking and some red from sell off Friday. Hoping Im right on this and will buy back in after the drop. Thanks again for the call out.


Post 3Q 2021 Earning Update

Congrats to anyone that played earnings, was absolutely blown away by the results. I’ll use this section to continue to update as the play continues. Recent announcements have helped give a clear vision for my timeline on this play and that is through the end of 2024. Today is as good a day as any to update the DD given they have their historic(?) Macy’s parade taking place. The reaction section is much more of an opinionated response from me and the fundamentals section is pretty self explanatory so if you’re going to skip sections skip those, but do not overlook the active investor engagement section, this is where I think the most bullish angle on Macy’s exists past these earnings.

Earnings Reaction

In a word: bullish. A lot of people played M and plenty were aware of the EPS and sales crush so I’ll skip the obvious data and point out what other indicators for me leads me to believe this play isn’t done.

Sales: Comparable sales up 37.2% on an owned basis and up 35.6% on an owned-plus-licensed basis versus 2020; up 8.9% and up 8.7%, respectively, versus 2019. So this is great, we’re still in a strange area where the economy isn’t fully open and the company is already outpacing sales from 2019. Clearly the company not only thrived but also survived the stress the pandemic put on the company.

Buybacks and Debt: Repurchased $300 million of shares, repaid $1.6 billion in debt ahead of schedule and paid $46 million in dividends. One of my concerns and many others is that Macy’s is up ~200% YoY at the time of this writing and surely profit taking is on the horizon. I was actually extremely nervous about a share offering given the rise in share price and the company’s goal to shift to mostly online retail, i.e. they’d need startup money. Not only did they repurchase ~10 million shares, they also paid off a bunch of debt. I will address why I think they didn’t take the opportunity to offer shares to the market in the update on the E-Commerce spin-off section.

Consumer Base: Added 4.4 million new customers into Macy’s brand, a 28% increase over 2019. Pretty self explanatory, through their rewards programs memberships and availability to shop via an app they’ve significantly grown their customer base. I have a feeling that with supply chain constraints affecting other retailers we may see that consumer base continue to climb just due to sheer availability.

Inventory Status: Inventory was up 19.4% from third quarter 2020 but down 15.4% from third quarter 2019. I will say, the recent downtrend due to supply chain fears from JWN and GPS earnings can be a bit infuriating, but the company directly commented on supply chain issues and said they are not expecting a material impact for 4Q 2021 because they implemented several measures to prevent these issues. There wasn’t any direct comment regarding why inventory is down 15.4% from 2019, but considering the company does not expect an impact is a good sign and could also be due to efforts to make inventory management more efficient via the Polaris strategy.

Updated Fundamentals Overview

  • P/E (TTM): 11.96 (18.95) (There’s a discrepancy between Yahoo and Fidelity on this, if anyone knows the reason let me know)
  • Price to Cash Flow (TTM): 6.91 (14.26)
  • Price/Book: 3.77 (10.93)
  • Price/Sales (TTM): 0.46 (1.42)
  • PEG Ratio: Can’t find updated value - If you can feel free to comment

So not much has changed fundamentals wise, I expect M to trade somewhere between a 10 and 20 P/E moving forward, Price to Cash Flow is still screaming undervalued, and P/B and P/S hasn’t budged much which further pushes the undervalued price at the moment.

Active Investor Engagement

I noted before earnings that upon Jana Partners request to spin-off a Macy’s digital company that management was not interested. I was at the time hoping for a GME-esque engagement by the firm to continue buying stock in the firm, getting a board seat, then moving Macy’s in the direction they believe it should be headed. Looks like Jana Partners was able to persuade Gennette (CEO) based on this quote post earnings:

“This past year, we conducted an analysis of our e-commerce and brick-and-mortar operations, evaluating how each contribute to the value of the company as well as how each benefits from being integrated and working together. In collaboration with our Board and with assistance from our advisors, we look at multiple business models that would create long-term shareholder value while always respecting the omnichannel behavior of the customer. This work supported our digitally led omnichannel Polaris strategy that we are successfully executing.

That said, we also recognize the significant value the market is assigning to pure e-commerce businesses. And as we look at the landscape today, we are undertaking additional analysis that could help inform our long-term strategy to further unlock value for Macy’s, Inc. To help in these efforts, we have recently engaged AlixPartners to work with our Board and financial advisors. It is too early to tell what the results of this additional analysis will be, but we plan to update everyone after the work is complete.”

Quite a change of heart in under a month. I think that the root of the share buyback from Macy’s was due to Jana Partners showing the board the potential value of the Ecommerce spinoff from Sak’s Fifth Ave and they realized this value is closer to being unlocked than thought before. This is absolutely stuffed with potential catalysts and I’m using Sak’s spinoff on potential timelines on these:

  • Spinoff evaluation* announcement (Nov 2021)
  • Evaluation and passing of spinoff (I will reach out to investor relations, but let’s say 3 months for the evaluation and they get the go ahead from AlixPartners - February/March 2022)
    • When Sak’s announced their spinoff plans, they were initially valued at 2X of sales so Macy’s online spin-off without factoring in the 4th quarter and using sales data has an upper limit of valuation at $30 billion, more than 3X the current market cap. The 4th quarter for Macy’s is easily the most profitable so I will update after 4Q 2021 results come out.
  • Post spinoff commitment evaluation (September/October 2022)
    • Sak’s in the past 3 weeks has done evaluations of a spin-off, and based on consumer base growth from online efforts see a valuation of 8 billion, nearly 4X the initial amount from their original evaluation, which pins Macy’s at 120 billion (definitely not happening, these things aren’t linear, also, Macy’s has already begun pushing it’s online initiative where as Sak’s looks like they kind of did the online push all at once, so don’t expect to be hearing that value).

Suffice to say, if I had to take a guess, there will be an announcement likely in Q1 or Q2 of this year coming up regarding this potential spin-off and if things go well, we’re looking at quite a jump in share price. This is also leaving out the curated digital marketplace Macy’s is rolling out in the second half of 2022, which in itself should be a catalyst anyways.

Closing Thoughts

I think recent price action has been a factor of consolidation, bad days on the market as a whole, and fear from JWN earnings. I’d be surprised to see the share price drop below 29 but the potential is always there. I actually am extremely bullish on holiday sales as many competitors appear to be low on supply and they’ve added Toys R’ Us to their inventory. I continue to hold all my 2023 40 dollar calls and selling CC’s and CSPs with the dividends being a nice little boost to the shares I’m holding. At the time, the option chain only extended to 40 when I bought the calls and now it is up to 55 and honestly a little pricey so be careful if you’re going long with OTM calls. There is actually a lot to be bullish about with their management of actual stores and they’ve done some nice lite research on the impact of storefronts on ECommerce performance in the area so it seems like management is very focused to get this moving along. Leave a comment if you feel like adding to the discussion, thanks.

Edit: Adding tweet below, looks like black Friday went well

Edit 2: Recent article by Rueters going over possible hesitancy to split, raises concerns over how exactly purchasing and returns would be handled by 2 separate entities. Macy’s is very pleased with the ECommerce results in areas with a storefront present (2-3 times the digital sales in areas witb a nearby store) and seems like it wants to preserve that model if a spinoff were to take place. Luckily, it looks like Jana Partners is more than willing to step in if Macy’s isn’t progressing like they had hoped, and stepping very soon I might add, and gives some reason to believe in the potential timeline I laid out. See my favorite excerpt below:

“While Jana applauded Macy’s decision to launch the review, it has not ruled out a challenge to the company’s board. It will have the opportunity to nominate directors early next year should it decide the company has not made enough progress.”

Only thing else to add is that AlixPartners also worked with Sak’s when guiding the digital spinoff, meaning we might see a similar bullish evaluation when all is said and done. Despite the economic landscape I’m bullish on Macy’s Holiday season because of their stock and I’m really excited by Ultas sales in the make-up and perfume areas, could be a nice indicator for what to expect from them.