Goldman Sachs reveals one of the best-positioned retail stocks

Macy’s Inc (NYSE: M) is trading up this morning after a Goldman Sachs analyst said it was one of the best-positioned names in the retail space.

Macy’s stock has upside to $28

On Monday, Brooke Roach assumed coverage of the department store chain with a “buy” rating and said its shares had upside to $28 that suggests a more than 20% gain from here. Her note reads:

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We believe Macy’s is best-positioned to navigate an uncertain but softer landing economic environment.

Brand loyalty and the ability to better manage inventory than its peers were among reasons she cited for the bullish call. That helps the retailer focus more on innovation, Roach added.

That’s an interesting call considering the Macy’s stock is already up more than 15% for the year.

Macy’s has a reliable free cash flow

Earlier this month, Macy’s lowered its revenue guidance for the holiday quarter as Invezz reported here. It now forecasts up to $8.28 billion in revenue in Q4.

Still, the Goldman Sachs analyst expects improving private label and omnichannel support to help expand its market share moving forward. Macy’s, she added, will also benefit as the retailer continues to open smaller stores outside of malls.

Roach expects the post-pandemic boost in tourism to help Macy’s on the margins front as well.

Lastly, she has confidence in the strength of its balance sheet that, she says, can easily support $500 million a year in stock buybacks. Macy’s is also a dividend stock that currently pays a yield of 2.69%.