Macy’s is one of many retailers reeling from the COVID-19 outbreak, furloughing most of its 130,000 employees after closing its 800+ stores. But the effects also have hurt Macy’s status as a U.S. business power player: the department store is being removed from the S&P 500 Index. Macy’s will be replaced by air conditioning company Carrier Global, according to S&P Dow Jones Indices, which oversees the index.
The company’s shares have plunged more than 70% so far in 2020, leaving Macy’s with a market value of $1.52 billion as of closing on March 31, currently the smallest market capitalization on the S&P 500. The plunge is even worse on a longer timeline: the retailer’s market value has plummeted 94% from its July 2015 peak of $24.49 billion as the department store has struggled to adapt to major shifts in consumer preferences away from mall-based retailers and specialty apparel companies.
Macy’s stock dropped to an all-time low of $4.42 per share as of morning trading on April 1.
“Macy’s has a market capitalization more representative of the small-cap market space,” S&P said in a statement, adding that the company would become part of the S&P small-cap 600 index effective April 6. The S&P had cut Macy’s credit rating to junk — meaning the company is speculative for investors — on Feb. 18, amid concerns its improvement trajectory was weaker than expected. Credit agency Fitch Ratings downgraded Macy’s credit rating to junk status as well when the news broke.
The retailer already had a rough start to 2020, revealing in February that it would close 125 Macy’s and Bloomingdale’s stores by 2023 and lay off 2,000 corporate employees. Despite beating Wall Street expectations, Q4 comparable store sales still declined 0.5% for a relatively unimpressive holiday season. But the coronavirus pandemic only has exacerbated the retailer’s challenges, with the company saying it had lost the majority of its sales due to the recent store closures in a statement.
Alongside the furloughs, Macy’s revealed that it has suspended its quarterly dividend, fully drawn from its $1.5 billion credit line, frozen hiring and spending and canceled some orders. The company also withdrew its financial outlook for 2020.