M Stock Momentum: Recent Gains Mask Underlying Investment Risks

Macy’s (NYSE: M) has delivered impressive returns recently, with shares climbing 55% over the past year through early 2026. This surge reflects genuine operational improvements, yet it also raises a critical question for investors: Are these gains sustainable, or does the current valuation pose a hidden risk?

The company’s newest strategic initiative, launched in 2024, focuses on brand revitalization and expansion of its luxury divisions. Early results show measurable progress, but distinguishing between a genuine turnaround and a temporary rally remains the central investment challenge.

Strategic Execution Showing Real Momentum

The foundation of M stock’s recent performance rests on concrete operational improvements. The “Bold New Chapter” strategy encompasses three key pillars: strengthening the core Macy’s brand through selective store closures and renovations, expanding the Bloomingdale’s luxury banner, and scaling the Bluemercury beauty-focused segment.

Fiscal third-quarter results (ended November 1, 2025) demonstrate this strategy resonating with consumers. Same-store sales—the metric that strips out store closure impacts—grew 3.2% across all brands using the company’s comprehensive sales measure that includes online, licensed departments, and marketplace channels.

The luxury brands delivered particularly compelling numbers. Bloomingdale’s posted a robust 9% comparable sales increase, while the Macy’s nameplate grew 2.3% and Bluemercury expanded 1.1%. This performance across multiple banners suggests the turnaround isn’t confined to a single driver.

Valuation Becomes More Demanding

The market’s enthusiasm has reshaped M stock’s valuation profile significantly. The price-to-earnings multiple expanded from 8 a year ago to 12 currently. While this 50% multiple expansion reflects growing investor confidence, it requires scrutiny.

In absolute terms, a 12x P/E remains attractive relative to the broader market. The S&P 500 trades at 31x earnings, meaning M stock trades at roughly one-third the multiple of the overall index. This valuation gap suggests either that investors remain skeptical of the turnaround’s durability, or that M stock genuinely represents compelling value.

Where Caution Becomes Warranted

Despite encouraging near-term results, several factors warrant a measured approach to M stock at current levels. The recent sales acceleration has been partly fueled by consumer spending from higher-income households who have weathered economic pressures better than middle and lower-income consumers. If macroeconomic conditions tighten further or if upper-income consumer spending cools, momentum could evaporate quickly.

Additionally, retail turnarounds frequently follow patterns where initial enthusiasm wanes once the low-hanging fruit of store optimization is exhausted. The company must demonstrate that it can sustain sales growth through multiple economic cycles, not just during a period of relative consumer resilience.

The valuation expansion from 8x to 12x P/E, while still reasonable in absolute terms, eliminates much of the margin of safety that typically attracts value-oriented investors to deeply discounted stocks. At these levels, M stock is pricing in meaningful confidence that the turnaround succeeds.

The Investment Decision

For current shareholders, the recent gains justify holding while monitoring quarterly results for signs of deceleration. For prospective investors, waiting for further validation of the company’s sustainable growth trajectory may prove prudent. You might forfeit some upside in an optimistic scenario, but you’ll substantially reduce the risk of buying into a value trap disguised as a comeback story.

The key metric to monitor: whether same-store sales growth remains stable in the next 2-3 quarters, particularly for the Macy’s banner which represents the core business. If momentum persists and luxury brands continue expanding, M stock could justify even higher valuations. If growth stalls, the recent P/E expansion could quickly reverse.