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Goldman Sachs analysts rate Macy’s as ‘one of the best positioned retail stocks’

Yahoo Finance Live anchors discuss a new Goldman note on Macy's stock.

Video transcript


DAVE BRIGGS: Macy's shares popping a bit on a note from Goldman Sachs calling the retail giant one of the best-positioned retail stocks with notable upside despite what is expected to be a tough year for the broader sector. Analyst Brooke Roach initiated coverage of the stock as a buy. Her $28 price target implies an upside of more than 20% over where the stock closed Friday. Quote, "We believe M is best positioned to navigate an uncertain but softer landing economic environment," Roach said in a note Monday to clients. "The company is entering '23 in a position of strength with high affinity among customers, improving brand momentum compared with peers."

It just goes on and on, Seana. This is a real surprise for a company that I don't think there was a lot of faith in. You see the stock up just slightly today, up almost 17% this year. I didn't feel that positive momentum, but, elsewhere, look, when Goldman Sachs has it, clearly investors are buying it.

SEANA SMITH: Yeah, investors are really listening to this call. I have some questions, though, especially after we heard Macy's come out, warn about how challenging of a couple of quarters it could potentially be for the retailer. And we've heard that similar type of messaging from a number of CEOs, from a number of executives within the retail industry.

So, yes, they're saying Macy's is best positioned. I have some questions, though, just in terms of that upside potential, at least over the next couple of quarters. If we do see a stronger-than-expected downturn here or deeper-than-expected downturn, that obviously would be a huge concern here for Macy's, for this sector at large.

Goldman, though, reiterating its sell rating on Kohl's. Nordstrom shares were also lower. They were downgraded to neutral. So they're not bullish across the board. Macy's, though, I was a little bit surprised by this call.

- Yeah, it just felt like, OK, the retail sector, it's not doing well overall, but Macy's, out of the bunch, best positioned due to those strong margins, best positioned due to some of those profitability tailwinds that they have relative to those competitors.

But if you take a look at retail sales, that continues to tick higher. The consumer is pressured. You mentioned that warning from Macy's that the holiday quarter will likely come in softer due to inflation. So it seems like Macy's is like the lesser of the evils there, but, overall, it's a very tough environment for this sector.