Macy’s, Inc.

is known as the Great American Department Store was established in 1858 and now

has 810 stores operating in the United States, coast-to-coast. Macy’s stores nationwide are grouped into

69 geographic districts that average ten to twelve stores each. Most stores are located at urban or

suburban areas. As of January 30, 2010, the Company’s operations were conducted through four retail

operating divisions – Macy’s, macys.com, Bloomingdale’s, and bloomingdales.com. The Company is a

retail organization operating retail stores and Internet websites under two brands (Macy’s and

Bloomingdale’s) that sell a wide range of merchandise, including men’s, women’s and children’s apparel

and accessories, cosmetics, home furnishings and other consumer goods. Macy’s and Bloomingdale’s

branded operations are located primarily in New York which involve central buying, merchandising

planning, stores senior management and marketing functions. The business functions, such as finance,

human resources, law, property development and supply purchasing are located primarily in Cincinnati.

However, for the purpose of this paper, I will specifically analyze Macys’ inc and utilize the SWOT

analysis for Macy’s only, as well as the financial worksheets.

The Company’s retail stores and Internet websites sell a variety of different merchandise which includes

men’s, women’s and children’s apparel, accessories, cosmetics, home furnishings and other goods. The

merchandise varies by size of store, known as “merchandising character” and “character of customers in

the trade areas”.

Macy’s is not your average department store. It is distinctly different from other major retailers of it’s kind.

Aside from the department store sales, Macy’s heritage includes special events – the Macy’s

Thanksgiving Day Parade, Fourth of July Fireworks, flower shows, fashion extravaganzas, celebrity

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appearances, cooking demonstrations and holiday traditions such as the arrival of Santa Claus to tree

lightings and detailed animated window displays. Overall, department stores are in a period of decline

and consolidation. Competition has increased as department stored are forced to compete with

discounters, luxury chains, specialty stores and the internet. As a result, in today’s age, you could look at

department stores as an endangered species. For example, in 1980 there were 35 major department

store chains, leaving only 13 left today. Due to the changes in department stores, Macy’s has found its

self with strengths and weaknesses.

Utilizing the SWOT model, the following analyzes the strengths and weaknesses of the company, Macy’s:

Strengths:

1.) The MACY’S brand is one of it’s strongest assets and is the most recognizable names in the retail

department store industry.

2.) Macy’s has a unique marketing channel. The marketing efficiencies allow a better focus on it’s

core assets and implement marketing efficiencies through national marketing campaigns. As

opposed to splitting resources for regional campaigns, Macy’s is able to buy more national

advertising.

3.) Macy’s continues to be focused on four key priorities for improving the business. These include:

differentiating merchandise assortments and tailoring them to local tastes, delivering obvious

value, improving the overall shopping environment, and enhancing customer engagement, loyalty

and traffic through more brand focused and effective marketing (macysinc.com, pg.14).

4.) Through a newly developed unified organization and utilizing these actions, and with investment

in local markets through “My Macy’s” in 2008 and 2009, they have been able to reduce expenses

by more than $500 million per year going forward.

5.) In 2009, online sales (macys.com and bloomingdales.com combined) were up 20 percent.

6.) Macy’s continues to grow by learning from the process of analyzing customer behavior by data

collection which leads to new marketing approaches.

7.) Macy’s has made large strides in reducing the impact on the environment. I.e.: installing solar

systems in 40 stores, investing in energy efficient projects, decreasing use of paper by 24%, and

diverted 60% of waste from the stores away from landfills.

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Weaknesses:

1.) Home furnishings and miscellaneous makes up for only 15% of sales annually. Men’s and

children’s apparel makes up for only 22% of sales annually.

2.) In today’s evolving customers, a majority of customers changed their shopping habits. More

shoppers research purchases on line and comparison shop. Macy’s must appeal to the new way

of shopping and strive to meet the needs of their customer.

3.) Working capital requirements fluctuate during the year. It increases in mid-summer and

increasing significantly around the holiday season. This is when they must carry significantly

higher inventory levels for consumer demand.

4.) They are subject to unfavorable economic and political conditions, other developments and risks.

5.) Changes with “interest rates, rates of economic growth, fiscal and monetary policies of the

government, inflation, deflation, consumer credit availability, consumer debt levels, tax rates and

policy, unemployment trends, oil prices, and other matters that influence the availability and cost

of merchandise, consumer confidence, spending and tourism could adversely impact the

Company’s business and results of operations” (macysinc.com, pg.78).

6.) Macy’s has significant additional expenses in the period leading up to the months of November

and December for the anticipation of higher sales volume at this time, including for additional

inventory, advertising and employees.

Opportunities:

1.) “My Macy’s” has invested in talent, technology and marketing that ensures that each and every

Macy’s store is “just right” for the customer who shops in that location.

2.) Since first impressions are a big deal, Macy’s feels it’s first impression will have a significant

impact on those loyal to their store. The shoppers will come and judge the overall shopping

experience and the merchandise behind the Macy’s name.

3.) Localization is a key component of Macy’s strategic formula for continued growth and success.

4.) Macy’s carries 15 private brands of various items. In 2009, private brands exceeded 19 percent of

sales at Macy’s. Macy’s feels these private brands deliver outstanding fashion, quality and value

to the customer.

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 5.) Macy’s expanded their presence in social media in 2009 by implementing sites such as

Facebook, Twitter and YouTube. They had nearly 250,000 friends on Facebook in 2009.

Threats:

1.) Due to constant fashion and household trends, Macy’s is forced to keep up with strategic

priorities such as assortment, value, shopping environment and marketing.

2.) Because of the seasonal nature of the retail business, the number of employees peaks in the

holiday season.

3.) The retailing industry is intensely competitive, and Macys must keep a continuous competitive

edge against competitors.

4.) Macy’s faces the Squeeze by being threatened of being squeezed from all other retailers such as

specialty shops, internet retailers, and middle ground competitors.

5.) The Company conducts its retail merchandising business under highly competitive conditions.

Competition includes: assortment, advertising, price, quality, service, location, reputation and

credit availability.

6.) The Company’s sales and operating results depend on consumer preferences and consumer

spending as well as the economy.

7.) The failure to anticipate, identify and respond to emerging trends in lifestyle and consumer

preferences could have a material adverse affect on the Company’s business.

Macy’s has a significant competitive edge among it’s department store competitors. I believe that

the values that Macy’s has, and it’s loyalty to its customers is a major component as to its developed

success. Macy’s four strategic priorities are : “differentiating merchandise assortments and tailoring

them to local tastes, delivering obvious value, improving the overall shopping environment, and

enhancing customer engagement, loyalty and traffic through more brand focused and effective

marketing” (macys.com/investors, pg. 9). Working together, corporate financial objectives are: “to

grow sales, to continue to increase the company’s profitability levels (earnings before interest, taxes,

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depreciation and amortization) as a percent of sales, to improve return on invested capital, and to

maximize total share holder return” (macys.com/investors pg.58).

I firmly believe that a company is only as good as it’s employees. Terry Lundgren of Macy’s, CEO,

chairman of the board, president and the director of Macy’s has been noted as an “innovator in

merchandising, branding, and localization” (Wikipedia.org). He was known as being instrumental in

the developing of the company’s private brands of merchandise, as well as creating one of the

largest retailers in the world. Ever since his graduation in 1974 with a bachelor’s degree, he was

awarded the honorary doctor of laws degree, and proceeded to work in the retail industry.

Throughout his career he has been the president of Bullocks, CEO of Neiman Marcus, CEO of

Federated Merchandising group, and CEO of Macy’s. Working under Terry, is Thomas Cody, a vice

chair, Janet Grove, a vice chair, and Susan Kronick, a vice chair.

As an outsider, I would make the recommendation that Macy’s does increase their capital

expenditures to increase competitiveness. As previously stated, there are numerous competitive

edges in today’s retail world. Macy’s challenge is disocunters, luxury & specialty stores, internet,

and mail order. If Macy’s can expand on it’s capital expenditures it will give them a competitive edge

with others. Purchasers these days want the lowest price, and Macy’s has had the reputation of

being an upscale store. However, often times you can get a product at Macy’s for the lowest price.

If Macy’s took the capital to advertise this, I believe that more consumers would consider Macy’s

when making purchases.

I would recommend that Macy’s increase market spending by at least 4 million dollars with in the

next two years. I believe that Macy’s should increase this spending in online advertising. Since the

internet is becoming a preferred and convient way to shop, it would be ideal for Macy’s to put more

advertising here. They should advertise more in the social media, online print ads, and comparison

ads. I feel this would give them more of a competitive edge, yet not lose their image.

Overall, there are two ways to increase profits in any business. This is to increase sales, and reduce

labor costs. The question lies, How should Macy’s go about contolling costs including labor and

health care? The answer is not simple, however I have concluded the following would help in cutting

costs. Since labor is an important part of the cost structure, a small reduction in labor costs can

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 result in a large boots to Macy’s bottom line numbers. Labor cost’s include wages, taxes, and health

benefits that the company must pay towards the employee. If Macy’s can cut back some labor, they

are ultimately cutting back on employee hourly wages, salaries, benefits, health insurance, disability

insurance, paid time off and 401K plans. Ultimately, to increase income, one must reduce debt, and

debt lies in too many employees.

To save money, yet run an effective retail chain, I would make some recommendations. I believe

that cross training is essential when training employees. Not only does it empower the employee, it

also helps the employer out in times of need. This is a process where employees are trained how to

efficiently do their jobs, yet are able to fill in for other jobs as needed.

To cut costs, I would also recommend offering an early retirement to older employees, this way we

can hire more highly paid workers. This in turn may aid in the avoidance of lay off’s. Overall, there

are many ways a company can save money, yet save the company at the same time. I believe that

Macy’s has the capability to conduct both.

Macy's, Inc. is a publicly traded corporation and company's shares are held widely by
individuals and institutional investors.

 Company name: Macys, Inc.

 Ticker symbol and the exchange on which it is traded: Traded on the NYSE with “M” as a ticker
symbol.

 Industry and sector: In the retail industry, department store holding company as the owner of Macy’s
and Bloomingdales department store.

 Net sales: Macy’s reported a net sales for 2009 fiscal year of $23.5 billion.

 Current stock price: As of 12/05/2010 at 3:59 pm, EST, the stock was $25.20 per share.

Common size statement

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INCOME STATEMENT 2009 2008 2007
---------- ---------- ----------
Net Sales 100.00% 100.00% 100.00%
Less: Cost of Goods Sold 60.30% 59.58% 59.40%
---------- ---------- ----------
Gross Profit 39.70% 40.42% 40.60%

Less: Operating Expenses 39.21% 37.46% 36.87%

---------- ---------- ----------
Operating Income 0.50% 2.96% 3.74%

Less: Interest Expense 0.00% 0.00% 0.00%

Other Income (Expenses) -2.25% 0.00% 0.00%
Income before Taxes -1.75% 2.96% 3.74%

Less: Taxes Related to Operations -0.54% 1.56% 1.70%

---------- ---------- ----------
N.I. before Min. Ern. -1.21% 1.39% 2.04%
---------- ---------- ----------
N.I. before Nonrecurring Items -1.21% 1.39% 2.04%

Oper. of Discontinued Segment;

Income (Loss) 0.00% -0.06% 0.03%
---------- ---------- ----------
Net Income (Loss) -1.21% 1.33% 2.07%
= = = =

BALANCE SHEET 2009 2008 2007

- --------- --------- ---------
ASSETS
Current Assets:
Cash 5.90% 2.10% 4.10%
Net Trade Receivables 1.98% 1.67% 1.75%
Inventories 21.54% 18.21% 17.99%
Other Current Assets 1.02% 0.78% 1.28%
--------- --------- ---------
Total Current Assets 30.44% 22.76% 25.12%
Long-Term Assets:
Net Tangible (Fixed) Assets (other than
construction in progress) 47.15% 39.55% 38.83%

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 Other Nonoperating Assets 22.41% 37.69% 36.06%
--------- --------- ---------
Total Long-Term Assets 69.56% 77.24% 74.88%
Total Assets 100.00% 100.00% 100.00%

LIABILITIES AND EQUITY

Current Liabilities:
Accounts Payable 8.55% 14.85% 16.73%
Short Term Loans 4.36% 2.40% 2.20%
Other Current Liabilities 10.24% 2.04% 2.59%
--------- --------- ---------
Total Current Liabilities 23.15% 19.29% 21.52%
Long-Term Liabilities:
Long-term Debt 39.44% 32.70% 26.55%
Other Long-term Liabilities 16.44% 12.36% 10.46%
--------- --------- ---------
Total Long-term Liabilities 55.87% 45.06% 37.01%
Total Liabilities 79.02% 64.35% 58.53%
Shareholders' Equity:
Common Equity-incl. Ret. Ern. 20.98% 35.65% 41.47%
--------- --------- ---------
Total Equity 20.98% 35.65% 41.47%
Total Liabilities and Equity 100.00% 100.00% 100.00%

Condensed Consolidated Balance Sheets

(Dollars in millions)

January 31,2009
ASSETS
Current Assets:

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Cash and cash equivalents ....................................................... $ 1,385
Receivables .................................................................................. 360
Merchandise inventories .......................................................... 4,769
Supplies and prepaid expenses............................................... 226
Total Current Assets ................................................... 6,740
Property and equipment – net ................................................ 10,442
Goodwill ....................................................................................... 3,743
Other intangible assets – net .................................................... 719
Other assets ................................................................................. 501
Total Assets ................................................................. $ 22,145

PROFITABILITY 2009 2008 2007

- - - -
Net Profit Margin #N/A 1.39% 2.04%
* Total Asset Turnover 1.12 0.95 0.91
* Return on Assets #N/A 1.32% 1.86%

Operating Income Margin 0.50% 2.96% 3.74%

* Operating Asset Turnover 1.45 1.52 1.43
* Return on Operating Assets 0.72% 4.49% 5.33%

* Sales to Fixed Assets 2.38 2.39 2.35

* Return on Investment #N/A 1.64% 2.37%
* Return on Total Equity #N/A 3.70% 4.49%

* Return on Common Equity #N/A 3.70% 4.49%

Gross Profit Margin 39.70% 40.42% 40.60%

Macy’s Gross profit margin remains almost at the same level during the three years

showing that there is no major change in trading expenses for Macy’s.

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 Works Cited

"Investor Relations - Macy's, Inc." Macy's, Inc. Web. 06 Dec. 2010. <http://www.macysinc.com/ir/>.

"M Income Statement | Macy's Inc Common Stock Stock - Yahoo! Finance." Yahoo! Finance - Business

Finance, Stock Market, Quotes, News. Web. 06 Dec. 2010. <http://finance.yahoo.com/q/is?s=M>.

Month, By. "Financial Statements - Macy's, Inc. - Macy's, Inc." Macy's, Inc. Web. 06 Dec. 2010.

<http://www.macysinc.com/investors/FinancialInformation/Statements.aspx>.

Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 06 Dec. 2010.

<http://finance.yahoo.com/>.

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