Warren Buffett-Backed Macy’s Shares: A Value Opportunity Beyond the Headlines

Investors familiar with Berkshire Hathaway might note its continued stake in Macy’s (NYSE: M) despite the retailer’s declining mall traffic and shifting consumer trends. Berkshire acquired the stock during its struggles and has since added shares, signaling confidence in its potential.

Macy’s is trading at a 10 P/E ratio, down to 7.5 earlier this year, suggesting surface-level affordability. However, deeper analysis reveals complexities beyond this metric. The company’s real estate portfolio, valued at over $9 billion, significantly exceeds its $6.7 billion market cap, positioning it as a potential bargain relative to its assets.

Sales growth indicators show promise: after a 2025 decline, Macy’s reported its strongest Q1 fiscal 2026 in four years, raising its net sales guidance. Comparable sales for 2026 are now forecast to grow 0.5%–1.2%, signaling recovery momentum.

Real estate and dividends further bolster its appeal. Macy’s owns much of its real estate, a strategic advantage as peers like Kohl’s face persistent declines. Its current 3% dividend yield – up 5% recently – is sustainable, with $196 million in payouts against $1.4 billion in free cash flow over 12 months.

Comparisons to industry peers reinforce its value. Walmart and Costco trade at 40+ times earnings, while Target’s P/E sits at 18. Macy’s 10 P/E remains strikingly low, particularly given its asset base and recovering sales trend.

Berkshire Hathaway’s involvement underscores market recognition of undervaluation. Though critics may dismiss the stock due to past struggles, CEO Greg Abel’s leadership and Berkshire’s strategic additions suggest potential upside as growth resumes.

However, risks remain. Macy’s dividend payout is below pre-pandemic levels ($1.51/share vs. current ~$0.77), and declining foot traffic pressures retail margins. Diversification into digital commerce remains critical to long-term sustainability.

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Should you invest in Macy’s?

Macy’s stock represents a speculative yet data-backed opportunity. Its cash-generative assets, recovering sales, and Berkshire’s endorsement create a compelling case. Yet, broader retail sector volatility and dependency on mall-based sales require caution.

Key Insights

• Macy’s real estate portfolio may hold more value than its stock price.

• Dividend yield exceeds industry averages, offering income potential.

• Positive sales momentum follows years of decline.

• Berkshire Hathaway continues to add shares despite market-wide selling.

Disclaimer: Investments in retail demand critical evaluation of macroeconomic trends. The Motley Fool’s Stock Advisor team emphasizes Costco, Walmart, and Target as top holdings, reflecting long-term confidence in resilient business models. Macy’s could still offer asymmetric upside for disciplined investors.

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