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Takeaway: Retail analyst Brian McGough sees #LateCycle risk in Macy's numbers.

Macy’s shares are getting crushed today. The department store giant’s stock is down 14% after reporting troubling 3Q earnings. Are Macy’s poor performance emblematic of a broader economic trend playing out, perhaps even of an emerging consumer recession?

We think so.

Shhh! Macy's CEO Just Hinted At Recession - macy s crashing

Whether you look at durable goods, consumer confidence, industrial production, ISM Manufacturing, company earnings (the list goes on and on), the data appears to be rolling over.

Macy’s CEO Terry Lundgren seems to think so too. In fact, his presence on today’s earnings call spoke volumes in and of itself. As Hedgeye Retail analyst Brian McGough pointed out in a note to subscribers this morning, it was the first time that Lundgren had participated in an investor call since 4Q 2009. Back then, Lundgren was taking a victory lap of sorts, after Macy’s had emerged from the recession with a clear vision forward.

Shhh! Macy's CEO Just Hinted At Recession - Macy s dude

How times have changed. In its most recent quarter, Macy’s sales were down 5%, inventories up 5%, and the company lowered full-year revenue and profit guidance. “The company didn’t have a whole lot to get bullish about,” wrote McGough.

Furthermore, if Lundgren’s presence this go-around was meant to downplay Macy’s poor quarterly results, he did an equally poor job of it. Here’s an excerpt from McGough’s research note:


“Arguably the most troubling factor from our vantage point is that Lundgren said "We believe that the retail industry is going through a tough period that we seem to experience something like this every five to seven years or so, and this one feels familiar in that regard."   

And a tweet from Keith.

Click image to enlarge

Shhh! Macy's CEO Just Hinted At Recession - r word 

So while he didn’t come right out and drop the “R” word (Recession), we can read between the lines. In his research note, McGough offers his thoughts:

“He probably did not mean this to sound so dire, and softened it up accordingly after seeing the stock down double digits (his recoil didn’t work). But our concern is that growth is definitely slowing in the broader economy, and it appears to be very late-cycle.


But it does not feel like a recession – yet. If Macy’s is putting up numbers like this and making these statements today, what happens when (not if) the US economy contracts again? We certainly don’t want to be there when that happens.”

Macy’s is just one more example of what our Macro team has been calling out for a while now, #LateCycle and #GrowthSlowing.

Don’t say we didn’t tell you so.