Why Amazon Should Buy Macy’s

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Artwork by Elias Stein


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Amazon.co.uk

expects year-over-year sales to rise 27% in the second quarter and its shares to rise 40%.


Macy’s

has closed stores, laid off workers and seen sales and shares plummet 60% this year, although unlike many of its retail rivals, it remains solvent. Still, Dominic Rispoli, managing director of Lincoln International’s consumer group and head of its retail effort, thinks Amazon, which acquired Whole Foods Market in 2017, should consider buying the 116-year-old retailer with a part of his $27 billion in cash. .

This is a provocative argument. Rispoli notes that 80% of the $3.7 trillion in retail sales go through physical stores. Amazon owns 38% of e-commerce, but only 5.6% of all retail. Macy’s, he says, “could transform Amazon.” Why? Macy’s has a $5 billion online business. “It would connect well to the Amazon platform from day one,” he adds. And Macy’s would give Amazon access to the second-largest consumer market: clothing and shoes.

Amazon has struggled to convince branded clothing companies to sell aggressively on its website.


Ralph Lauren

and


Canada Goose

are featured at Macy’s or its Blomingdales stores, not so much at Amazon. Buying Macy’s might help.

As for the price, Macy’s market capitalization fell to $2.15 billion. It trades for 0.4 times estimated 2021 sales and had $5.7 billion in debt as of May. It refinanced $4.5 billion in loans earlier, which it will use to pay down some of its debt. Leverage, however, is relative. Amazon has generated some $20 billion in free cash flow over the past 12 months. Macy’s didn’t make a fuss to sell. But at prices like this, Amazon might stop and check the goods.

Next week

Monday 06/29


Micron Technology

announces results for the third fiscal quarter.

The national association of Realtors reports its Pending Home Sales Index for the month of May. Economists forecast a sharp rebound of 25%, to 89%; in April, the index fell by 21.8%. An index of 100 equals the average level of contractual activity during the year 2001, which was the first year to be examined.

The Federal Reserve Bank of Dallas releases its Texas manufacturing outlook survey for June. The index is expected to show a continued rebound in the manufacturing sector, with a reading of minus 30, after registering minus 74 and minus 49.2 in April and May, respectively.

tuesday 6/30

Conagra Brands and FedEx report earnings.

Mylan holds special meeting of shareholders to seek approval of proposed merger with Upjohn, a division of


Pfizer

which sells off-patent drugs, primarily in emerging markets. The merger was announced 11 months ago and was expected to be finalized in mid-2020, but was postponed to the second half due to the impact of the Covid-19 pandemic.

The Supply Institute Management publishes its Chicago Purchasing Managers Index for the month of June. The consensus call is for a reading of 42, down from 32.3 in May, which was the lowest since March 1982.

The conference board publishes its consumer confidence index for the month of June. Expectations are for a level of 90, down from 86.6 in May.

Wednesday 7/1

ADP press releases its June national jobs report. Economists forecast a gain of 2.9 million jobs in the private sector, a huge improvement from the drop of 2.8 million in May.

Constellation Brands and General Mills Announce Quarterly Results

The Federal Free Market The Committee publishes the minutes of its June monetary policy meeting.

ISM press releases its manufacturing purchasing managers’ index for June. The consensus forecast is for a reading of 49, down from 43.1 in May and 41.5 in April.

Thursday 7/2

The Labor Office Statistics publishes the employment report for June. Economists expect it to show that 3 million non-farm payrolls have been added and the unemployment rate has fallen to 12.2% from 13.3%. This follows a 2.5 million increase in non-farm payrolls in May, a surprising number, since almost all forecasts called for a sharp drop.

The Ministry of Labor reports on initial jobless claims for the week ended June 27. Unemployment claims have fallen for 12 straight weeks, since peaking at 6.9 million at the end of March, but remains well above 1 million, a record before this year.

Friday 7/3

US stocks and fixed income markets are closed on Independence Day.

Write to Luisa Beltran at [email protected] and Al Root at [email protected]

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