Feedback On Our Coverage Resumption

Research evidence excerpt

Feedback On Our Coverage Resumption

nsus’ topline declines & $2, respectively. This call

generated by far the most investor interest following our resumption, we think in

part due to 1) long-dated negative Department Store sub-sector views, & 2) mostly

neutral to negative Street views on M stock specifically. Our conversations were

largely educational, focusing on – 1) our Reimagine store analysis assumptions &

recent changes in company disclosure, 2) what the Reimagine transformation has

entailed (more here), & 3) the state of the department store industry (possible

consolidation among survivors – the “last man standing” component of our thesis,

Off-Price gains potentially slowing, if peer bankruptcies distorted recent gains, etc.).

Most questions revolved around 4) M’s ability to flow topline upside through to the

bottom-line, 5) the catalyst from here (more below), 6) what inning M is in with

respect to Bold New Chapter execution, & 7) margin implications from the

Reimagine roll-out. Our takeaways are two-fold – investors 1) first need to re-

acquaint themselves with the M story & department store sub-sector overall before

underwriting a more durable sales recovery, & 2) found the “last man standing”

industry dynamic particularly compelling (despite representing the smallest driver

of our constructive topline view…). Looking ahead, we think consistent net sales

outperformance could become a key catalyst for positive EPS revisions & valuation

re-rating, with 1Q27 particularly important following further non-go-forward Macy’s

banner closures & a potentially further evolved reporting structure – where the

impact of the Reimagine strategy should be clearer. The underlying data that

supports our Turnaround Tracker is reviewed in detail here, & our Reimagine store