Investment Thesis
Macy's demonstrates deteriorating financial health with negative free cash flow (-25M), razor-thin net margins (0.9%), and weak profitability metrics (ROE 3.1%, ROA 0.8%) that fail to justify its debt burden. The company's capital intensity exceeds operating cash generation, and interest coverage of 1.8x indicates limited debt service cushion in an economically sensitive retail sector.
Strengths
- Modest revenue growth of 3.2% YoY suggests stabilization in a challenged sector
- Solid gross margin of 65.9% indicates reasonable pricing power on merchandise
- Quick debt reduction potential with manageable debt-to-equity ratio of 0.56x
Risks
- Negative free cash flow (-25M) signals insufficient cash generation to fund operations and capital needs
- Extremely low net margin of 0.9% and operating margin of 1.9% provide minimal buffer for downturns
- Weak interest coverage ratio of 1.8x creates debt service vulnerability; high leverage relative to thin profitability
- Quick ratio of 0.18x indicates severe liquidity constraints for short-term obligations
- Return metrics (ROE 3.1%, ROA 0.8%) substantially below cost of capital, destroying shareholder value
Key Metrics to Watch
- Free cash flow trend and path to positive conversion
- Operating margin expansion and cost structure efficiency
- Debt refinancing risks and debt/EBITDA trajectory
- Same-store sales and comparable store growth
- Capital expenditure requirements and maintenance levels
Financial Metrics
Revenue
14.7B
Net Income
135.0M
EPS (Diluted)
$0.48
Free Cash Flow
-25.0M
Total Assets
17.1B
Cash
447.0M
Profitability Ratios
Gross Margin
65.9%
Operating Margin
1.9%
Net Margin
0.9%
ROE
3.1%
ROA
0.8%
FCF Margin
-0.2%
Balance Sheet & Liquidity
Current Ratio
1.25x
Quick Ratio
0.18x
Debt/Equity
0.56x
Debt/Assets
0.0%
Interest Coverage
1.80x
Long-term Debt
2.4B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-03-19T19:27:14.086938 |
Data as of: 2025-11-01 |
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