Berkshire just loaded up on Macy's stock: should you too?

Macy’s Inc M is in focus on Monday morning after Berkshire Hathaway’s latest filing disclosed a new position worth roughly US$55 million (approx. $76.7 million) in the iconic retail chain.

The strategic buy-in from one of the world’s most revered conglomerates has boosted interest in M, with the company’s share price up nearly 4% at the time of writing.

Berkshire’s revelation arrives despite a challenging macroeconomic backdrop, with Macy’s stock currently down some 17% versus the start of this year.

Why Berkshire Hathaway invested in Macy’s stock

Berkshire’s filing is monumental, given that it marks the firm’s first direct venture into the department store sector since 1966.

Its former chief executive and legendary investor, Warren Buffett, remained cautious on brick-and-mortar retail for decades, making this sudden accumulation under new CEO Greg Abel even more interesting for market participants.

What attracted the conglomerate was M shares' deep value proposition and solid fundamentals.

Trading at a rather compressed 8x forward earnings, with an extensive real estate portfolio and some US$23 billion (approx. $32.1 billion) in sales (trailing twelve months), Macy’s represents a quintessential Buffett value play.

Berkshire may also have been compelled due to Macy’s disciplined cost controls and its rock-solid shareholder returns; its dividend yield currently sits at a super lucrative 4.03%.

Significance of Berkshire’s stake for M shares

The Berkshire announcement injects immense institutional credibility into M’s ongoing corporate turnaround – lighting a bullish path for the stock through the remainder of 2026.

The department store giant is currently executing its ambitious Bold New Chapter strategy, focused on closing about 150 underperforming locations, while modernizing and investing in its 350-strong “go-forward” locations.

These store closures are expected to result in a near 4% year-on-year decline in Macy’s upcoming Q1 earnings scheduled for early June, in line with management’s expectations of pressure on the top-line due to these store closures.

For investors, what’s more important is that the early pilot store transformations have already shown big promise, capturing strong comparable sales.  

All in all, the sudden endorsement from Berkshire offers a powerful stabilizing force, which could accelerate both retail and institutional flows into Macy’s shares as the year unfolds.  

How to play Macy’s at current levels

Macy's high expected dividend yield of more than 4% provides an attractive income cushion while the retail business transforms.

Plus, its valuation multiple also signals that much of the existential retail risk is already baked into the stock price.

However, investors should note that Berkshire’s entry is relatively small compared to its total cash pile, acting more as a calculated option on a successful turnaround rather than a definitive bet on high growth.

While Macy's presents a compelling risk-to-reward ratio at current levels, market participants must weigh the persistent macroeconomic headwinds against the structural tailwinds of the “Bold New Chapter” strategy before fully committing.