Macy’s Inc. has been downgraded again as analysts express little faith in the company’s ability to recover from a coronavirus-related business fallout this year.
This week, Fitch Ratings lowered the struggling department store’s long-term issuer default ratings from “BB+” to “BB.” It added that its outlook on the chain is negative.
According to analysts, the downgrade and negative outlook reflect the “significant business interruption” from the COVID-19 outbreak, as well as the “implications of a downturn in discretionary spending” that the agency expects could extend well into 2021.
Fitch also forecasted that Macy’s sales this year could plummet nearly 30% to $17.6 billion, while its EBITDA could decline to about $200 million from $2.2 billion, as many of its locations remain closed to the public. As of Memorial Day weekend, roughly 270 of its namesake as well as Bloomingdale’s outposts have reopened. (The company has about 850 stores in 44 states, including the nameplates Bluemercury and Story.)
Last week, the retailer warned that it could lose $1 billion as a result of the health crisis: For the first quarter, it announced expectations of a loss in the range of $905 million and $1.11 billion, compared with last year’s net income of $203 million. The company forecasts first-quarter sales of between $3 billion and $3.03 billion — down from $5.50 billion last year.
What’s more, during a virtual fireside chat with Gordon Haskett Research Advisors in late April, CEO Jeff Gennette told analysts that Macy’s would come out of the pandemic a “smaller company” as its business continues to struggle with a stalled turnaround plan and imminent debt deadlines.
The chain estimates that it will end the first quarter with $1.52 billion in cash on hand, versus $737 million a year ago. Its total debt, however, has swelled: Macy’s predicts its balance sheet to show $5.66 billion in debt — up from the previous year’s $4.72 billion.