Macy's has reached a 'sobering breakpoint'

Macy’s is feeling the brunt of the retail apocalypse.

Stores are shutting down across the country and firms are witnessing their profits diminish as e-commerce firms such as Amazon continue to win over shoppers.

On Thursday, shares of Macy plummeted after the firm’s disappointing earnings report.

In a note penned by a group of equity analysts at UBS led by Michael Binetti, the bank said the firm is dealing with a number of issues including amll traffic hitting a “sobering breakpoint.”

“Macy’s 1Q SSS declined -5.2% ex-licenses (we believe buy-side bar was ~-2.5-3%) — implying a 380bp sequential deceleration in the 2-yr stack SSS vs 4Q16,” the bank said.

In addition, Macy’s cosmetics category, which has been a strong source of sales for the department store, is struggling.

“The company saw elevated promos in the high margin/high frequency cosmetics category (cosmetics also contributed to the GM miss) — likely reflecting volumes for the category moving off-mall to pure-plays like ULTA or even offprice,” the analysts wrote.

Macy’s handbag and watches categories are also under pressure.

As such, the bank has dropped its price target for the stock to $US26 from $US34. That’s above the current market price of $US23.80 per share.

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