Macy's Stock: Deep Value Opportunity or Classic Value Trap?​

Macy's (NYSE: M) is an iconic retailer, opening its first store in New York City in 1858. That's certainly impressive in a very competitive industry that's seen its share of once well-regarded companies disappear.

But that doesn't mean the company will continue to thrive. In fact, Macy's had a multi-year sales slide, although it has had positive sales growth recently.

It's time to dig deeper to determine whether the company can produce sustainable long-term sales growth. Combined with looking at the valuation, that'll determine whether Macy's shares represent a value stock or value trap.

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A turnaround plan

In 2024, management implemented its Bold New Chapter strategy. A three-year plan, key elements aimed at improving results included strengthening the Macy's brand (including closing or selling underperforming Macy's locations and revamping a number of others) and expanding luxury brands Bloomingdale's and Bluemercury.

This fiscal year's results have shown improvement. Looking at overall sales isn't particularly useful for retailers, but particularly for Macy's given store closures. Same-store sales (comps) provide a more meaningful comparison.

Across all its brands, Macy's fiscal third-quarter comps using its owned-plus-licensed-plus marketplace measure increased 3.2%. Comps on this basis include online sales and sales by departments licensed to others. The results were for the three months ended on Nov. 1, 2025.

Comps increased across all three brands, including 9% at the Bloomingdale's brand. Macy's and Bluemercury had 2.3% and 1.1% comps growth, respectively.

Valuation

These sales results should certainly give investors hope, and they've shown how their appreciation. The stock produced a total return, including dividends, of 55% over the last year through Jan. 21. That handily beat the S&P 500 index's 15%.

As a result of the sharp stock price movement, the valuation has become more expensive. Macy's stock has a price-to-earnings (P/E) ratio of 12, up from a P/E of 8 a year ago.

Still, the current valuation looks attractive compared to the overall market. The S&P 500 has a P/E multiple of 31.

Value stock or value trap?

Recent results have been encouraging and should give investors hope. However, its results, particularly from its luxury brands, have also undoubtedly been helped by higher-income customers who haven't borne the brunt of the economic pain from factors like higher food prices.

While the valuation remains tempting, I'd hold off until you see further evidence that Macy's can sustain its sales growth. You may miss some of the stock's upside, but you'll avoid falling into a value trap.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.