The Macerich Company MAC is well-poised to gain from its portfolio of premium shopping centers in vibrant markets. Its focus on omnichannel retailing and developing mixed-use assets is likely to support its long-term growth, along with balance sheet-strengthening moves.

However, growing e-commerce adoption by consumers raises concerns for the company. Macerich also has a substantially leveraged balance sheet, and this remains a headwind.

Analysts seem bullish on this retail REIT, which carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share has moved northward marginally to $1.57 over the past week.

What’s Aiding MAC?

Macerich has a high concentration of premium malls in vibrant U.S. markets. These properties are located in densely populated areas, where affluent consumers with significant disposable incomes live and play, offering the company solid scope to generate decent cash flows. Macerich’s decent number of well-capitalized retailers in its tenant roster and well-laddered lease maturity schedule help it navigate well through challenging times.

Macerich has been making efforts to enhance its asset quality and customer relationships by increasing the adoption of the omnichannel model. This is going to play well for the company. Further, the shift toward re-use and mixed-use properties through recapture and repositioning of anchor tenants remains a key emphasis, while bringing brands to new markets at its mall is likely to attract shoppers.

Macerich has been focusing on an aggressive capital-recycling program. This involves the divestiture of non-core and slower-growth assets and the usage of the proceeds to increase its presence in core markets and invest in higher-growth properties through acquisitions, developments and redevelopment initiatives and lower its leverage.

Strategic dispositions made over the years have helped reduce impending bankruptcy issues across the lower-quality disposed portfolio. For 2024, Macerich expects to incur approximately $160-$180 million for development, redevelopment, expansion and renovations.

Over the past six months, the company's shares have soared 38.4%, outperforming the industry's 14.1% growth.

Image Source: Zacks Investment Research

What’s Hurting MAC?

Given the conveniences of online shopping, growing e-commerce adoption may weigh on Macerich’s prospects. Online retailing is likely to remain a popular choice among customers, adversely impacting the market share for brick-and-mortar stores.

Macerich’s performance in the upcoming quarters is expected to be negatively impacted by the bankruptcy of Express and others. From the beginning of 2024 through Nov. 6, 2024, the company has witnessed nine bankruptcy filings from its tenants. Hence, tenant bankruptcies are likely to affect the company’s performance.

Macerich has a substantially leveraged balance sheet. As of Sept. 30, 2024, its total pro-rata share of debt was approximately $6.78 billion and net debt to adjusted EBITDA was 8.23X.This leveraged balance sheet limits its strength to withstand any credit crisis and unexpected negative externalities in the future.

Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Regency Centers REG and TANGER INC SKT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Regency Centers’ current-year FFO per share has been raised marginally over the past month to $4.28.

The Zacks Consensus Estimate for TANGER’s current-year FFO per share has been raised marginally over the past two months to $2.11.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.