Why Macy's Inc. Stock Lost 14% Last Month

What happened

Macy's Inc (NYSE: M) stock fell again in October as the venerable department-store chain suffered due to bad news from its peers and general malaise in the retail industry. According to data from S&P Global Market Intelligence, the stock dropped 14% in October.

As the chart below shows, the stock was volatile over the course of the month, but plunged toward the end as J.C. Penney slashed its guidance, weighing the rest of the department store sector.

So what

Macy's started off the month on the wrong foot as shares dropped 4.3% on Oct. 2 on reports that Nordstrom's plans to go private were falling apart as the company couldn't get the necessary lending. The news weighed on Macy's stock as the potential deal seemed to show that department stores were undervalued and that private equity might be interested in them.

Macy's stock drifted lower for the rest of the first half of the month and fell another 1.5% on Oct. 16 when Nordstrom confirmed that it was backing away from efforts to go private. Shares then rebounded on Oct. 20 when Macy's revealed it had a buyer for part its downtown Chicago store, which is considered its most valuable location after the Herald Square flagship. According to the Chicago Tribune, Macy's will sell the top half of the store, or 700,000 square feet to Brookfield Asset Management.

Finally, the stock crashed 8% on Oct. 27 as J.C. Penney cut its guidance and continued to fall through the end of the month on concerns Macy's was facing similar problems.

Now what

Macy's regained some of those losses as the stock jumped 11% after its third-quarter earnings report came out Thursday morning. Although comparable sales at owned departments fell 4%, earnings per share improved from $0.17 to $0.23, due in large part to gains from real estate sales, beating estimates at $0.19. Including store closures, overall revenue was down 6.1% to $5.28 billion, which was below expectations at $5.31 billion. The company also bumped up its full-year EPS guidance a penny to $3.38-$3.63.

That report may offer some encouragement to Macy's and perhaps shares have gotten so cheap that such a spike shouldn't be surprising, but the underlying performance is still problematic. If comparable sales continue to fall, store closures will likely follow. Even with further real estate sales, it's hard to see the stock rebounding over the long term unless those trends change.

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Jeremy Bowman owns shares of J.C. Penney. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.