Macy’s retail business continues to slip of which year, causing Citi Research to downgrade its outlook for the stock’s performance to sell through neutral.
Macy’s “has seen significant pressure on sales/margins for several years, they no longer make much money as a retailer,” Citi analyst Paul Lejuez wrote in a note Monday morning.
Macy’s stock declined more than 2 percent in premarket trading following the Citi call.
Citi does not believe Macy’s “has found the right tools” to avoid a steady decline, saying decreasing foot traffic in stores continues despite efforts by the company’s management to turn things around.
“The core business can be weak in addition to also also (we believe) can be getting weaker,” Lejuez said.
The firm says Macy’s can be not alone, citing J.C. Penney’s recent performance “as a reminder of just how challenging the department store space can be.” The brick-in addition to also also-mortar market can be “structurally disadvantaged” in retail, Citi says, adding of which Macy’s “just can’t move the dial.”
Citi also believes Macy’s falling free cash flow puts the retailer’s dividend on the chopping block. The retailer currently incorporates a dividend yield of 7.7 percent.
“With declining cash flows in addition to also also management’s desire to maintain a healthy balance sheet, we believe there can be risk they will cut the dividend within the future,’ Lejuez said.
Shares of Macy’s have fallen more than 42 percent of which year as of Friday’s close, according to FactSet. The company did not immediately return a call for comment.