Overweight Unpacked: Why Macy’s Is The "Last Man Standing"

Research evidence excerpt

Overweight Unpacked: Why Macy’s Is The "Last Man Standing"

framework

standing" framework compelling. Our thinking is grounded in three observations: ** = Based on consensus methodology

§ = Consensus data is provided by Refinitiv Estimates

e = Morgan Stanley Research estimates

#1 The Department Store industry remains in secular decline – but importantly,

Quarterly EPS ($)

is also consolidating. The Department Store sub-sector remains structurally 2026e 2026e 2027e 2027e

Quarter 2025 Prior Current Prior Current

challenged, with the channel continuing to lose wallet share within broader US

Q1 0.11 - 0.13a - -

retail (see Appendix Exhibit 4 ). However, industry contraction is increasingly Q2 0.35 - 0.36 - -

occurring alongside competitive consolidation, as weaker operators lose relevance, Q3 0.05 - (0.05) - -

Q4 1.64 - 1.87 - -

close stores, &/or exit the market altogether ( Exhibit 1 ). This creates an opportunity e = Morgan Stanley Research estimates, a = Actual Company reported data

for the remaining operators to capture displaced demand despite continued

pressure on the overall channel. We believe Macy’s is increasingly positioned to be

one of those share winners.

#2 We believe Macy’s increasingly exhibits the characteristics of a Department

Store share consolidator. Our Reimagine store analysis suggests the Macy’s banner

has become a more compelling shopping destination, with Reimagine stores 1)

delivering an average ~2-pt comp premium to non-Reimagine Go-Forward stores

over the ~L2Y, & 2) accounting for ~75% of Go-Forward sales despite representing

only ~60% of the Go-Forward fleet. Together, we believe these metrics provide

clear evidence that investment is translating into better topline trends (see Morgan Stanley does and seeks to do business with