Macy’s Inc. is being forced out of the stock market big leagues.
The department store was dropped from the S&P 500 index that tracks the largest stocks on Wall Street — a move that will compel many big investment funds targeting large cap stocks to sell.
“Macy’s has a market capitalization more representative of the small-cap market space,” S&P said in revealing the switch, which will take effect on Monday.
The collective value of all the company’s stock — its market capitalization — stood at just $1.5 billion Wednesday, a drop of 70 percent from the $5.1 billion market cap it started the year off with.
While the company — and nearly everyone else — has been laid low by the COVID-19 outbreak, the recent drop is also part of a longer fall that’s seen investors turn away particularly from mall-based retailers and companies that rely heavily on outside brands to connect with shoppers.
In 2015, Macy’s had a market cap as high as $24.5 billion as investors were betting a consumer revival and the economy would help lift the company.
The consumer did revive as the economy improved and unemployment dropped, but discretionary dollars shifted pointedly to experiences, their smartphones and online services.
But if investors were wary of the traditional brick-and-mortar crowd before, they’re standing well more than six-feet away now that the company has very little money coming in and payments to landlords and others coming due.
The shift out of the S&P 500 could be painful in normal times, but given the disruption in the market and what by nearly all accounts will be a steep recession this year, it no doubt ranks as the lesser of many concerns.
On Monday, Macy’s furloughed most of its 125,000 workers and said it would keep its stores closed “until we have clear line of sight on when it is safe to reopen.”
“While the digital business remains open, we have lost the majority of our sales due to the store closures,” Macy’s said. “We’ve already taken measures to maintain financial flexibility, including suspending the dividend, drawing down our line of credit, freezing both hiring and spending, stopping capital spend, reducing receipts, canceling some orders and extending payment terms, and we are evaluating all other financing options.”
The company — like nearly everybody — is in a lifeboat and working with “the absolute minimum workforce needed to maintain basic operations.”
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