Alcoa Corp
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Materials : Metals & Mining | Small Cap Value
Company profile

Alcoa Corporation (Alcoa) is engaged in the production of bauxite, alumina and aluminum of various cast and rolled products. The Company’s operations consist of three reportable business segments: Bauxite, Alumina, and Aluminum. The Bauxite and Alumina segments primarily consist of a series of affiliated operating entities held in Alcoa World Alumina and Chemicals (AWAC), which is a joint venture between Alcoa Corporation and Alumina Limited. The Aluminum segment consists of the Company’s aluminum smelting, casting, and rolling businesses, along with the energy production business. Its Bauxite segment consists of the Company’s global bauxite mining operations. The Company’s Alumina segment consists of the Company’s worldwide refining system, which processes bauxite into alumina. The Aluminum segment consists of its worldwide smelting and casthouse system, a rolling mill in the United States, and a portfolio of energy assets in Brazil, Canada, and the United States.

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UPDATE: Macy's stores at risk of closing drive an average of 80% less sales than 'Growth' stores: JPMorgan

7:25 am ET February 6, 2020 (MarketWatch)

By Tonya Garcia, MarketWatch

Macy's announced it's closing 125 stores over three years and cutting more than 2,000 jobs

Macy's Inc. announced on Tuesday that it will close about 125 underperforming stores over the next three years, and figures provided by JPMorgan analysts indicate just how unproductive those locations are the chopping block actually are.

After hours Tuesday and ahead of the struggling department store's investor event on Wednesday, Macy's (M) announced a turnaround strategy ( called "Polaris" that would include a number of steps, including a more curated merchandise selection and changes to the $6 billion digital business, including a relocation of the e-commerce headquarters to New York City from San Francisco.

The company will also reduce headcount of the corporate and support staffs by 9%, or 2,000 jobs. This doesn't include jobs that will be lost to store closures and staff adjustments in remaining stores.

Moreover, the company talked about expanding what it calls the "Growth treatment," which includes store revamps, technology improvements and local marketing. So far, 150 stores have gotten the "Growth treatment," accounting for more than half of 2019 store sales.

Store sales last fiscal year totaled $24.97 billion. The FactSet consensus for this fiscal year is $24.54 billion.

One hundred more stores will get the "Growth treatment" in 2020. Macy's announced plans to close nearly 30 stores ( in January.

See: E-commerce surge sparks questions about reliability of same-store sales metric (

"Digging deeper, the average neighborhood brick-and-mortar store being closed generates $11.2 million in sales per box, or 60% below the fleet average by our work, and 80% below the current Growth 150 brick-and-mortar store base," JPMorgan wrote.

Analysts think the Growth 250 stores will ring up more than 75% of Macy's brick-and-mortar sales by the end of fiscal 2022, though they will account for just 55% of Macy's fleet.

JPMorgan rates Macy's stock underweight.

Macy's operates about 680 stores that are either a Macy's or Bloomingdale's location, and another 190 stores under the Bloomingdale's The Outlet, Bluemercury or Macy's Backstage banners.

While the plan sounds dramatic, the time for a big change had come.

Also: J.C. Penney, Macy's and other department stores don't have many more season left for a turnaround, analyst says (

"Following a weak 2019, department stores must radically accelerate changes to their format and product offering in 2020," wrote Moody's analysts led by Christina Boni, a vice president with the group, in a report published Jan. 15.

"The sector heavily underperformed the broader retail industry in 2019, despite continued investments and offering updates."

Macy's reported ( same-store sales declines over the holiday period.

For the fourth quarter, Macy's estimates sales of $8.30 billion, a 0.6% same-store sales decline on an owned basis, and a 0.5% decline on an owned-plus-licensed basis. The FactSet consensus is for sales of $8.31 billion and a same-store sales decline of 1.1%.

Macy's is scheduled to report fourth-quarter earnings on Feb. 25.

Macy's is guiding for fiscal 2020 sales of $23.6 billion to $23.9 billion, adjusted earnings per share, excluding asset sale gains of $2.20 to $2.40, a 1.5% to 2.5% same-store sales decline in an owned-plus-licensed basis and, on an owned basis, same-store sales that are about 40 basis points better.

FactSet forecasts sales of $24.36 billion, EPS of $2.40, and a same-store sales increase of 0.3%.

Even with the anticipated changes, experts say there's more to be desired.

"There's got to be some value for why you'd go to a Macy's," said Stephen Beck, founder of cg42, a management consulting firm. "Historically it was quality and variety. Now you can get quality at a lot of different places and variety can be had at home at your fingertips."

Instead, the retailer should be asking who they're serving and why they would go to Macy's.

See:Another sign of the retail-pocalypse as e-commerce ETF overtakes one that tracks bricks and mortar (

"Until they answer those questions, I think you'll continue to see them struggle," Beck said.

Macy's has also announced a new, smaller store format that will open in Dallas on Feb. 6. Market by Macy's will cover 20,000 square feet offering items from specialty designers, local brands, an exclusive beauty brand, Getchell's Apothecary and Herald, an in-store food and beverage outlet.

The more localized focus is a strategy being employed by another department-store retailer (, Nordstrom Inc. (JWN) . Target Corp. (TGT) has also added small-format stores ( to its lineup.

"The work for Macy's today is to figure out how to bring the community aspect to their customers in a way that is not a mall flagship. How to translate the history and tradition to modern times," said Shelly Socol, chief executive of One Rockwell, an e-commerce agency serving lifestyle brands.

Making deep cuts is also a good idea because it'll allow the company to take a few necessary risks, according to Jonathan Treiber, chief executive of RevTrax, a platform that manages special offers and discounts.

Don't miss:L Brands would still face challenges if it sold off Victoria's Secret, analysts say (

"The bigger issue is whether Macy's needs a rebrand and whether Macy's will carry brand value for those marketplace participants, or will the Macy's brand be a deterrent for upstart brands to want to get involved," he said.

On the bright side, he notes that Macy's isn't weighed down by debt in the same way that a lot of troubled retailers are. Moody's backs that up.

"Macy's has continued to pursue a conservative financial policy by reducing debt by in excess of $2.7 billion in the past three years, which has provided support to its credit profile in the face of weakening operating performance," Moody's Boni said in a Wednesday morning comment.

Macy's stock rose 6% in Wednesday trading, but has tumbled more than 31% over the past year. The ProShares Decline of the Retail Store ETF (EMTY) is up 2.1% for the past 12 months, and the S&P 500 index has gained 22% over the past year.

-Tonya Garcia; 415-439-6400;

(END) Dow Jones Newswires

February 06, 2020 07:25 ET (12:25 GMT)

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