Macy's has reached a 'sobering breakpoint'
Stores are shutting down across the country and firms are witnessing their profits diminish as e-commerce firms such as Amazon continue to win over shoppers.
On Thursday, shares of Macy plummeted after the firm's disappointing earnings report.
In a note penned by a group of equity analysts at UBS led by Michael Binetti, the bank said the firm is dealing with a number of issues including amll traffic hitting a "sobering breakpoint."
"Macy's 1Q SSS declined -5.2% ex-licenses (we believe buy-side bar was ~-2.5-3%)- implying a 380bp sequential deceleration in the 2-yr stack SSS vs 4Q16," the bank said.
In addition, Macy's cosmetics category, which has been a strong source of sales for the department store, is struggling.
"The company saw elevated promos in the high margin/high frequency cosmetics category (cosmetics also contributed to the GM miss)-likely reflecting volumes for the category moving off-mall to pure-plays like ULTA or even offprice," the analysts wrote.
Macy's handbag and watches categories are also under pressure.
As such, the bank has dropped its price target for the stock to $26 from $34. That's above the current market price of $23.80 per share.
More from Frank Chaparro:
- Macy's has reached a 'sobering breakpoint' (M)
- $365 BILLION FUND CHIEF: There are too many fund managers on Wall Street
- Some of the biggest names on Wall Street all love the same stock market
- A top banker explains why he left Wells Fargo to join a tech company
- The CEO of a $385 billion investor talks Trump, emerging markets, and problems in active management