‘Retailpocalypse’ Is Over—Macy’s a Bargain: Bulls

"Sensationalist" fears of Amazon.com Inc.'s (AMZN) disruption of the traditional retail space are overblown, according to one team of analysts on the Street who suggests that "old-world brands and retailers" are finally figuring out how to compete in a new digital era. (See also: Amazon to Be No. 1 in Apparel in 2018: Morgan Stanley.)

Bulls at Evercore ISI upgraded shares of iconic department store chain Macy's Inc. (M) on Monday from short to long, expecting the stock to gain on a "critical turning point" for its sector, reported CNBC. The investment firm views the Amazon narrative as pricing in too much pain for old-guard industry players as they work out the kinks of inventory management and successfully market to a changing consumer cohort. 

"Macy's and others will have equal opportunity in the coming years to compete for the attention of discretionary consumers given a core set of competitive advantages that are not going away," wrote Evercore analyst Omar Saad. He highlighted Macy's access to better brands, "household name franchise" and its cheap to-no-cost real estate in prime locations compared to a growing number of online shopping rivals led by the Seattle-based behemoth. The analyst noted that Macy's brick-and-mortar fronts could also be leveraged as local distribution centers for the e-commerce age. 

New Life From Pop-Ups 

Saad applauded Macy's larger initiative to develop brands that resonate more with consumers, such as its recent acquisition of New York-based concept shop Story, where it will curate rotating and themed shopping experiences. Other pop-up-shop initiatives targeted at younger shoppers have been viewed as a means to offset unprofitable square footage, as noted by CNBC.  

Cincinnati-based Macy's has seen its stock gain 43.9% year-to-date (YTD) and has returned 52.3% over 12 months, sharply outerperforming the broader S&P 500's 2.6% and 12.5% increase over the same respective periods. 

The Evercore ISI analyst raised his 2018 earnings per share (EPS) estimate for Macy's to $3.15 from $2.95 and his 2019 estimate to $3.40 from $3.10. (See also: Macy's, Target Among Retail Stocks Making a Comeback.)