Berkshire Hathaway's Greg Abel Just Bought 3 Million Shares of Macy's Stock. It Sure Looks Cheap, but Is It a Great Value?

Macy’s first-quarter comparable sales rose 3% year over year, led by Bloomingdale’s at 10.2% and Bluemercury at 6.4%, while adjusted EPS of $0.13 beat guidance and improved from $0.11 a year ago. The company is also benefiting from a smaller store footprint and more efficient operations, and its dividend yield is about 3% at a P/E of 10. The article is more of a bullish commentary than a fresh catalyst, though Berkshire Hathaway’s first-ever purchase of Macy’s adds attention.

Analysis

The real signal is not that one legacy retailer is improving; it’s that capital is starting to discriminate within the department-store complex. A shrinking footprint plus better comps at the premium banners implies the category is bifurcating into “destination” shopping and everything else, which is structurally bearish for lower-end mall traffic but supportive for vendors and landlords tied to the higher-income customer set. If this mix holds for another 2-3 quarters, the operating leverage can look better than the top-line growth rate suggests because fixed-cost absorption improves faster than headline sales.

The second-order issue is that value investors may be underestimating the duration risk. A low multiple can be a trap if the improvement is being driven by promo cadence, channel mix, or inventory discipline rather than durable traffic gains; any re-acceleration in discounting would hit margin before comps roll over. The setup is therefore more of a 3-6 month sentiment trade than a clean multi-year compounder unless management can convert premium-banner momentum into sustained free cash flow and buybacks.

Berkshire’s purchase matters mainly as a positioning catalyst. When a blue-chip allocator takes a first bite in a neglected name, it can compress the discount to liquidation value, but that usually happens before the market fully prices in the cyclicality of earnings quality. The better expression may be to stay long the operating improvement and short the more vulnerable balance-sheet or mall-adjacent peers, because the winners in this reset are likely the stronger brands with pricing power, not the sector as a whole.

Key Decisions for Investors

• Long M on a 3-6 month horizon, but size it as a catalyst trade rather than a core compounder; target a rerating toward low-teens P/E if premium-banner comps stay >5% for two more quarters, with downside to the prior range if margins slip.
• Pair trade: long M / short a weaker department-store or mid-tier mall exposure basket (e.g., JWN or KSS if liquidity allows) to isolate execution and footprint rationalization; the spread should benefit if premium brands keep outperforming while traffic remains bifurcated.
• Buy call spreads in M around the next earnings window to express upside from continued operating leverage without paying for full multiple expansion; risk/reward is attractive if the market is only partially pricing in improvement.
• For longer-term portfolios, use any post-earnings strength in BRK.B as a proxy signal that capital discipline is being rewarded, but do not extrapolate the position into a full thesis on M until there is evidence of sustained FCF conversion and capital return capacity.
• Fade the consensus long-only enthusiasm on retail beta by hedging consumer-discretionary exposure into strength; the improvement at M is likely idiosyncratic, and the weak-link response in the rest of the sector can offset some of the optimism.