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Macy's is the classic cheap-but-challenged value situation. The stock trades at just 10.4x EPS and 0.3x sales, and the company is solidly profitable and cash-generative: FY2026 net income rose 10.3% to $642M, operating income grew 13.3% to $1.03B, EPS climbed 12.1% to $2.32, and operating cash flow grew 11.9% to $1.43B. Management is returning that cash — buybacks ramped to $250M (shrinking shares 5.0%) and a $197M dividend — while a 44.5% gross margin and 13.2% ROE show the merchandising model still works. The balance sheet is reasonable, with $1.25B cash and equity up 6.8% to $4.86B.

The problem is the top line. Revenue fell 2.4% to $21.8B and has declined every year — from $24.5B in FY2022 — reflecting the secular erosion of the department-store format against e-commerce and off-price competition. Macy's is managing the decline well (cost discipline and store-fleet optimization, with capex cut 28% to $373M, lifted earnings even as sales fell), but earnings growth built on a shrinking revenue base is inherently finite. The FY2024 near-wipeout of net income ($45M) is a reminder of how thin the 2.9% net margin makes the business when sales soften or markdowns spike.