Unlocking Macy's (M) Undervaluation: A Strategic Play in the Post-Recession Retail Rebound

The retail sector has long been a barometer of economic health, with its recoveries often lagging behind broader market rebounds. For investors seeking value in a post-pandemic landscape, Macy's (M) presents a compelling case. By analyzing historical retail sector rebounds, Macy's strategic restructuring, and current valuation metrics, this article argues that the company is undervalued and poised for momentum.

Historical Retail Sector Rebounds: Lessons from 2001 and 2008

Retail sector recoveries post-recession are typically protracted, with industries like consumer discretionary taking six to eight quarters to reach their lowest EBITA levels and even longer to return to pre-recession benchmarks according to McKinsey analysis. The 2008 Great Recession, for instance, saw the retail sector decline for over three years before stabilizing as research shows. During this period, Macy's demonstrated resilience by repositioning itself between mid-level and high-end markets, adopting the "Everyday Value" strategy, and leveraging celebrity collaborations to attract younger, fashion-conscious consumers based on data from Stern. These moves drove a 116% stock rebound between March 2009 and January 2010 according to McKinsey, underscoring the power of strategic adaptability.

In contrast, the 2001 dot-com crash had a milder impact on Macy's, as the broader economic collapse of 2008 created more sustained challenges. However, the company's shift from demographic-based marketing to taste-driven appeals, combined with store consolidations, enabled it to maintain relevance as data indicates. This historical precedent suggests that Macy's has a proven playbook for navigating downturns-a critical asset in today's evolving retail environment.

Macy's Post-Pandemic Restructuring: A Blueprint for Growth

From 2020 to 2025, Macy's has executed a multi-pronged strategy to adapt to the post-pandemic retail landscape. The "Reimagine 125" initiative, which modernizes key store locations, has driven 2.7% sales growth in 2025. Meanwhile, Bloomingdale's and Bluemercury have outperformed, with 8.8% and 1.1% comparable sales increases, respectively according to financial filings. These results highlight the company's ability to differentiate its brands and capitalize on niche markets.

Financial discipline has also been a cornerstone of Macy's recovery. As of Q3 2025, the company holds 447 million in cash and 2.0 billion in borrowing capacity, enabling shareholder returns through dividends and share repurchases. Despite a 50-basis-point tariff impact on gross margins, Macy's has reinvested cost savings into digital transformation and store modernization, positioning itself to compete in an omnichannel world.

Valuation Metrics: A Case for Undervaluation

Macy's current valuation metrics suggest it is trading at a discount relative to both its historical averages and the broader retail sector. As of Q4 2025, the company's trailing P/E ratio stands at 12.62, significantly below the industry average of 21.6x. Its P/B ratio of 0.96 further reinforces this narrative, as retail stocks historically trade at a premium during recovery phases. For context, during the 2008 recovery, P/E ratios surged due to plummeting earnings, yet Macy's current P/E is more aligned with post-2001 levels, when valuations remained elevated despite a recession as research shows.

While some analysts argue the stock is overvalued based on a $21.70 fair value estimate according to market analysis, this overlooks the company's improved balance sheet and strategic reinvention. Macy's P/B ratio of 0.96 is also below the current retail sector average of 4.30 for "Retail (Distributors)" as data indicates, suggesting it is undervalued relative to peers. Historically, value stocks-those with low P/B ratios-have outperformed during recovery periods according to research, making Macy's an attractive candidate for capital appreciation.

Momentum Potential: Navigating Challenges and Opportunities

Macy's faces headwinds, including e-commerce competition and shifting consumer behavior. However, its digital initiatives have gained traction, contributing to overall sales growth in 2025. The company's revised 2025 guidance, which raised net sales and adjusted EPS expectations according to financial disclosures, signals confidence in its ability to adapt.

Looking ahead, Macy's momentum could accelerate if it continues to execute its omnichannel strategy and leverages its prime store locations for experiential retail. The beauty segment, driven by Bluemercury's performance, also represents a high-growth opportunity. While tariffs and margin pressures persist, the company's disciplined cost management and reinvestment strategy position it to weather these challenges.

Conclusion: A Strategic Buy for Value Investors

Macy's undervaluation is supported by its historical resilience, disciplined financial management, and strategic reinvention. With a P/E ratio below the industry average and a P/B ratio signaling value, the stock offers a compelling entry point for investors who recognize its potential in a post-recession retail landscape. As the sector continues to evolve, Macy's ability to adapt-proven in 2008 and 2001-suggests it is well-positioned to deliver long-term returns.