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This former Steve Jobs insider at Apple thinks struggling Macy's won't die like Sears

Brian Sozzi

A one-time rival is throwing out a wee bit of praise for a former mall adversary, which has fallen on tough times.

Insert heart emoji.

“Macy’s will be around for a long time. The only question is how many years it takes for them to get down to the right number of stores. And what is the right number of stores? That is an unknowable question. I think it’s closer to 200 stores than 600,” former Apple store chief and former J.C. Penney CEO Ron Johnson told Yahoo Finance in an interview.

Macy’s (M) currently operates 680 traditional department stores under its namesake banner and Bloomingdale’s.

Johnson’s observations on Macy’s having to move quicker with store closures are on the mark. Because clearly, the department store’s awful two-year stretch financially highlights fundamental problems such as poorly positioned stores and a web business not keeping pace with rivals. If Macy’s doesn’t address these issues faster, it could go down the road of fallen mall competitor Sears.

Case in point is Macy’s latest holiday numbers.

Red flag for investors

Macy’s holiday season same-store sales (November and December) fell 0.6%. Wall Street estimates were for a 2% sales drop, but the better than expected results are hardly a call for celebration. In a red flag to investors, Macy’s didn’t address its full-year profit guidance despite the better than anticipated same-store sales. And it said it will close 28 stores in 2020.

CHICAGO, ILLINOIS - NOVEMBER 21: Pedestrians walk past a Macy's store downtown on November 21, 2019 in Chicago, Illinois. Macy’s Inc. reported a drop in third quarter sales and said the company is anticipating a weak holiday quarter as they, like other department stores, struggle to continue to attract customers. (Photo by Scott Olson/Getty Images)

Keep in mind that back in late November 2019, Macy’s issued its third profit warning of the year. All eyes now turn to Macy’s Feb. 5 investor day, where the company is expected to share details on how it plans to reverse its fortunes.

Wall Street remains cautious into the event.

Goldman Sachs retail analyst Alexandra Walvis reiterated her Sell rating and $12 price target on Macy’s following its holiday sales release this month. Walvis originally downgraded her rating in early December, citing weakening fundamentals on Macy’s.

Macy’s stock trades at $17.91 currently, down about 30% over the past year.

“The good news is that retailers could last a long time even with a tough balance sheet,” Johnson said. Perhaps, but time is ticking on Macy’s...which certainly has a tough balance sheet.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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