Shhh! Macy's CEO Just Hinted At Recession

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.


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more