It was just about a week ago when we took a look at Macy's (NYSE: M) and discovered that there might be a comeback buried in this outmoded little dinosaur of mall-facing retail. The company announced its first-quarter sales figures, and while they were pretty much as bad as was expected, they weren't as bad as they might have been.
Bad, But Not That Bad, Considering
Everybody knew that the first quarter was going to be pretty bad at Macy's. Macy's was already coming off a slow period anyway; retailers historically have a slowdown in the first three months of the year following the excesses of the holiday season. Moreover, inclement weather also steps in to hamper shoppers, which is a real problem for a company that's focused on physical retail and depends on foot traffic to keep merchandise flowing off shelves.
That was when March hit Macy's like a collection of tungsten rods dropped from low Earth orbit. The coronavirus shutdowns, and the Massive Indiscriminate Coronavirus Sales Event, did horrendous things to Macy's share prices in much the same way they did just about every other company in the world's. A recovery did follow, but only of the most anemic sort as the company discovered that its formerly anemic stock price in late 2019 was now an aspirational goal in 2020.
Yet after announcing its first-quarter results, the stock price enjoyed a pop upward, gaining an extra 1.5% in premarket trading, and managing to hold on to a lot of that gain going into the trading day.
Congratulations! It's Not a Complete Disaster!
Make no mistake, Macy's numbers for the first quarter were terrible, objectively. The company reported a net loss of $3.58 billion, which on a per-share basis works out to $11.53 lost. Considering that its first-quarter in 2019 boasted a net income of $136 million, or $0.44 per share, this is catastrophic.
However, a couple key points emerged to give some hope to the comeback narrative. One, despite the fact that Macy's stores all over the United States and beyond were shuttered by government mandate, the company still had revenue. It reported revenue of $3.02 billion, in fact, and though that was down 45% from the same time last year, revenue is revenue, income is income, and that means a viable company.
An Unexpectedly Bright Future, But Not Without Risk
There's even better news afoot when looking forward for Macy's. The company has just survived what may be the single worst period of economic history since at least the Great Depression, and possibly worse still. It didn't come out of that unscathed, naturally, but it did come out the other side as a viable company, which is more than a lot of smaller businesses can say, sadly.
Macy's has reopened nearly all of its stores, which will allow that foot traffic to come back on at least some level, and reports note that Macy's online retail presence has been its saving grace, with sales therein proving brisk. The company is remaining mum about its full-year guidance, which isn't exactly out of line given the year we've had so far. As one additional note of positive news, Macy's doesn't expect any further shutdowns this year, though the company is working to address any regional problems that crop up and is emphasizing flexibility in the face of massive and crippling uncertainty.
So, yes, Macy's has survived a test that has killed other businesses outright so far. It managed to produce revenue even in a serious downturn, proving there's at least some interest in its product line, and the early reports suggest that reopened stores in May and June have done better than expected already.
Certainly, Macy's has learned some lessons here. It's already putting out some impressive sales promotions to draw shoppers back; one sale involves up to 60% off on designer handbags, which should draw those being frugal, but not that frugal, in the face of uncertainty. It's learned firsthand the value of an online retail presence to carry a business through rough patches, much in the way that Target (NYSE: TGT) and Walmart (NYSE: WMT) has in recent months.
If Macy's can take these lessons to heart and carry on with them, the result should be a much more resilient retailer ready to take on the online giants and continue to be a viable and even vibrant part of the retail landscape. There's a lot to like at Macy's right now, more so than there was even before the pandemic started.
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What would you think of the long-term prospects of a business that paid you to buy their products? That’s an oversimplification of what occurred to the May futures contract for oil on April 20. The price for that contract sold for a negative price for the first time in history.
The crisis befalling the oil companies at this time can best be described as “only the strongest survive.” There’s just no way the oil companies can possibly handle month after month of rock-bottom oil prices.
The problem is almost comically simple to understand. There is a massively reduced demand for oil as millions of Americans are following mitigation orders ranging from social distancing guidelines to more restrictive shelter in place orders. At the same time, the market is trying to absorb the oversupply of oil that came from Russia and Saudi Arabia.
However, when the year started, things looked like it might be business as usual for oil producers. The U.S. economy was humming along and there was talk that the second half of the year might finally bring the boost to oil prices that many companies badly needed.
However, since the middle of February, the bottom has dropped out of the market in general, and oil prices have been one of the main sectors to feel the impact.
Initially, investors tried to remain optimistic. A month ago, investors thought that the economy might be reopening sooner rather than later. However, the exact timing of the reopening is about as fluid as a barrel of oil. And with it looking more likely that there will be more demand destruction at least through May, there’s very little to prop up the stock of any oil companies.
And that means that, in all likelihood, there will not be room left for some oil companies. We’ve highlighted five oil stocks that have a strong probability of not surviving the chaos surrounding the coronavirus and our nation’s response.
View the "5 Oil Stocks That May Not Survive the Current Crisis".