Macy's faces "structural issues" that won't be offset by the value found in its real estate portfolio, according to Citi Research, which downgraded the retailer to neutral from buy on Friday.
"M's inability to post better results against very easy comparisons in 4Q highlights the structural issues facing the department stores (they largely sell 'other people's stuff' and have too many stores in world shifting to Ecom)," Citi analyst Paul Lejeuz said in a note titled "Not Strong Enough to Win the Race; Downgrading to Neutral."
Lejeuz based his previous buy rating on, among other things, Macy's strong holdings in real estate, a position he is less confident in now.
"And importantly, based on some of its recent real estate transactions and significant store closings throughout the industry, we are less comfortable that real estate can provide the same level of downside protection that we once believed," Lejeuz wrote.
Shares of Macy's were down 1 percent at Friday's opening bell.
Macy's shares 5-day performance