00:00 Brian
my stock of the day and it is Macy’s staying on the retail theme this week. hasn’t brought great news for retailers. Home Depot kicked off the week with a weak quarter and outlook. Target’s quarter stunk on Wednesday. Low store third quarter sales barely grew. Results out of TJX, of course, that’s Marshall’s, Mosley and HomeGoods on Wednesday, painted a picture of a pressured shopper looking for deals. Ditto Walmart’s numbers today. This sent me back to check in on Macy’s. I was shocked, I mean just shocked to see Macy’s stock up 62% in the past six months. This is shocking given Macy’s many struggles, the pressure on middle-income America shopper and the shift to online shopping that is lifting results at Walmart and Amazon. When Macy’s reports in a few weeks, it will have to deliver big to justify the run in its stock. In fact, the lines at Macy’s stores on Black Friday best be wrapped around the store a few times to justify this stock’s move. Let’s get the round table to weigh in on this one. Tom Hayes, Jim Bianco and Brooke De Palma. Brooke, you cover Macy’s for us. What is this company doing right?
01:06 Brooke DePalma
Well, Brian, last time I spoke to Tony Spring at the start of September, that’s the CEO at Macy’s. He told me that this is the beginning of momentum. And what we saw was in their latest quarterly report, following that, we saw stock go up about 20%. And that was largely because same store sales increased for the first time in three years. that was the the largest increase in three years, and it was the first positive quarter since the first quarter of 2022. And what we’ve seen Macy’s do is really double down on how it’s thinking about its portfolio as far as store closures go. It seems like there’s more to come with that and perhaps uh, you know, we’ll get the full final count of how many stores are closed in that fourth quarter, which he hinted to me uh over the phone. He said he’s still a big believer in the stores, but they just got to make sure that they have the relevant portfolio of their stores. And so all those things seem to be working in Macy’s favor by doubling down on on on fixing their portfolio and also getting the right product in front of consumers right now.
02:18 Brian
Tom, Macy’s is a growth stock. You like it?
02:22 Tom Hayes
Yeah, well, this was a case of it’s so bad, it’s good. Uh this was a left for dead real estate play that activists had been circling around for years, trying to get them to just close the stores and sell off the real estate. So there was always a downside protection if it was liquidated. Now they’ve actually got someone in there who can execute. You had same same store sales growth last quarter of up about 1%. Some store revamp, some store closing, some uh better execution. Obviously they have the higher-end Bloomingdale’s which that consumer has generally held up. Uh, so yes, it’s it’s up a lot off the lows but uh we’re basically back to the future. I mean, this is below levels it was years ago. I wouldn’t bet the ranch on this one.
03:13 Brian
Jim, what what is amazing to me is we’ve been talking about Walmart all morning long. You dig into their earnings presentation, apparel was strong for them. Now, if Walmart’s doing well on apparel and they have improved the quality of what they are selling in terms of apparel at Walmart. I mean, Macy’s can’t come out in a week or two and blow away blow it away on earnings. What am I missing here?
03:39 Jim Bianco
I I just think that the retail space is one of the more difficult spaces as Tom pointed out, if you execute, you do well and if you don’t execute, you don’t do well and you can almost ignore the economy for a moment right now. If you’re Walmart, the world’s largest retailer and you execute, you’re doing well. If you’re Target, you don’t, if you’re Macy’s, you know, you’re kind of a a mixed bag and it’s all over the place. And that’s what makes it really hard to get a good read on what the general economy is doing right now. So, you know, when we want to talk about what their consumer is doing and what the retailer, what the consumer is doing, maybe we should be looking beyond just some of these earnings reports because they’re all over the place.
04:26 Brian
Uh, Tom, last word to you on this one. Uh, any retail stocks you like into the holiday season?
04:34 Tom Hayes
I like, you know, it’s interesting, the Bank of America Fund Manager survey uh had consumer discretionary stocks. managers cut them by the by the most on record. I think there’s a lot of opportunity in the discretionary stocks. I would maybe one step removed. I like the turnaround story in VF Corp with Brack and Daryl, that’s Timberland, Northface and Vans. Vans has been the drag. It’s starting to show signs of positivity. Uh we don’t own Nike, but I I think Nike is a turnaround play you could start to pay attention to in the consumer discre discretionary place. And some of the uh restaurant stocks. So I wouldn’t I wouldn’t bet against the consumer. Uh we do like consumer discretionary here because it’s been hit so hard. Uh as far as straight up retail, we’re going to take a pass on that.