Macy’s $1.1 billion bond sale a reminder of financial constraints

Summary

Macy’s announced a $1.1 billion bond sale to help shore-up the struggling retailers balance sheet as it navigates the COVID‑19 shutdown. The fresh injection of capital is needed to pay down short term debt maturing in January 2021 and fund operations in the immediate term.

Report

Analysis

The bond issuance and the immense financial challenges facing Macy’s is a reminder of constraints on its necessary attempt to prepare for an even more digitally oriented retail landscape when more state lockdowns are lifted and stores reopen. A Cyberhedge 1-Star rated company, Macy’s was already dealing with a poorly executed digital transformation strategy that contributed to its chronic underperformance over the past year. Like most 1-Star rated companies heading into the pandemic, Macy’s weaknesses have only been further exacerbated by the demand shocks. It is difficult to see how the company emerges stronger from the crisis considering that the analysis in our December Alert still stands: “With both budgets and capital position shrinking, the company is constrained in its ability to invest outside of its core growth strategy into necessary risk-management tools, such as cyber governance.”

Much of the money raised from this bond sale must be directed to paying off short term debt and keeping the lights on rather than investing in a stronger digital future, which would involve improving on its poor cyber governance to reduce the further downside risks that come with it.

Macy’s also serves as a reminder of the importance of viewing a company through a cyber-financial lens. Its struggles with digital transformation prior to the crisis (the ‘cyber’) are now made more acute because of the company’s poor financials.

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Denis Bolshakov

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