Macy’s Inc - Stocks

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Swap point Long/Short
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Instrument description

The retail industry is one of the essential sectors of the market as it ensures that hundreds of different consumer goods are offered and delivered to the customers. For many decades, the retail industry was seen as a brick and mortar store, but the advancement of computers and the internet led to e-commerce, which has quickly become very popular in many developed countries of the world.

The retail industry is quite big and includes a variety of stores such as specialty stores, superstore, hypermarket, discount store, convenience store, and department store. The global retail sales are expected to touch $26.7 trillion by 2023, and it includes sales from various retail stores, including bookstores, restaurants, and grocery stores.

The US has probably got the most diversified and wide range of retail stores that includes popular names such as Walmart, Target, Amazon, Macy, Kroger, Sams Club, and Costco. Macy’s Inc. is a famous name in the retail industry, and it operates many department stores in the US.

Macy’s is an American retailer holding company formed in 1929 with current corporate offices located in New York, Ohio, and Cincinnati. Macy’s runs and manages three branded stores by the names of Macy’s, Bloomingdale’s The Outlet, and Macy’s Bluemercury and Backstage. Macy’s has a total of 840 stores across more than 45 states of the US, along with stores in Dubai, Puerto Rico, and Guam. The company has almost 140,000 employees. Macy’s became the largest US store according to retail sales in 2015.

Macy’s offers a wide assortment of merchandise and products through its retail stores that include apparel for men, women, and children, household goods and accessories, home furnishings, cosmetics, and other consumer goods. Macy’s has its flagship and iconic store in Manhattan’s Herald Square, which was also known as the world’s largest department store since 1924, with a retail space of 1.1 million square feet. The popular Macy’s Thanksgiving Parade Day is an annual ritual that is held every year since 1924.

History of Macy’s

Macy’s is one of the oldest and prominent names in the retail industry, formed by Rowland Hussey Macy in 1858. The current store became part of the Cincinnati based Federated Department Stores in 1994. The Macy’s holding company was renamed in Macy’s Inc. in 2007.

Rowland Hussey opened the R.H Macy and Co. in New York City in 1858 as a dry goods store, and the first day sales were about $11.06. In 1959, Macy’s released first-year financial results that showed sales to be nearly $85,000. In 1872, The Bloomingdale Brothers Inc. was formed by brothers Joseph and Lyman Bloomingdale in New York. In the same year of 1972, Bloomingdale expanded their East Side Bazaar and sold women apparel and fashion accessories and so the concept of ‘specialty store’ was established.

In 1902, Macy’s moved to Herald Square in Manhattan, New York, which proved to be a vital success and serve as an iconic location for the brand. In 1924, Macy’s Herald Store became the largest store in the world, and first, Macy’s Thanksgiving Parade Day was held. In 1925, Macy’s bought Davison Paxona that was based in Atlanta.

In 1929, a group of several family-owned stores was formed called ‘Federated Department Store’ that included Abraham & Strauss, Filene’s of Boston, and F&R Lazarus. Macy’s became part of Federated Department Stores eventually but much later in 1994. The Bloomingdale Brothers joined the Federated group of stores in 1930, and the sales of Federated stores reach $112 million.

In 1934, a new merchandising standard was introduced by Fred Lazarus, where the garments were arranged in a particular size based on color, price, and style. In 1945, Macy acquired O’Connor Moffat & Company, and Federated moved its offices to Cincinnati. In 1956, Burdines became part of Federated Stores. In 1959, Federated acquired Rike’s, Dayton, and Goldsmiths.

Bloomingdale launched the world’s first designer shopping bag in 1961. The Federated group of stores touched $1.2 billion of annual sales in 1964. The conversion of all Federated divisions to a single electronic platform was done in 1985 by Federated Systems group called ‘SABRE Group, ’ which is now called the Macy’s Systems and technology.

In 1986, the May Company bought Associated Dry Goods, L.S Ayres, Lord & Taylor, and J.W Robinson, which was considered the largest retail acquisition. In 1988, Campeau Corporation bought Federated, and many of the Federated divisions are sold to other established retailers. Macy’s acquired Bullock’s and I. Magnin from Campeau while May Company bought Foley’s and Filene’s from Campeau.

In 1989, Federated formed its own Financial, Administrative, and Credit services unit to consolidate its credit services spread in different divisions; the unit is now known as Macy’s Credit and Customer Services. In 1990, Federated, along with Allied Stores, filed for bankruptcy to restructure and reorganize.

In 1992, Federated and Allied Stores were merged to form new Federated Department Stores, and it had a total of 220 department stores in more than 26 states, and the annual sales reached $7 billion. Also in 1992, Macy’s filed for bankruptcy under Chapter 11. In 1994, Federated bought Joseph Horne Co. from Pittsburg.

In December 1994, Federated acquired Macy’s & Co., and it was termed as the largest department store retailer in the country. Federated further announced to either sold or convert the I. Magnin stores into Macy’s or Bullocks and Federated Logistic now called Macy’s Logistics was also formed in 1994 to manage the distribution network.

In 1996, Bloomingdale opened its four stores in California, and Macy' was also launched. In 2003, Macy’s name was integrated with regional divisions of Federated, such as Lazarus- Macy’s, Goldsmiths- Macy’s, Burdines- Macy’s, and Rich’s= Macy’s. In 2005, all the stores were rebranded under Macy’s name, and Federated operated under Macy’s and Bloomingdale. Also, in 2005, Federated acquired May Department Stores Company, and more than 400 May stores were changed to Macy’s in 2006.

In 2007, the shareholders decided to change the name from Federated Department Stores to Macy’s Inc. in 2008, Macy’s celebrated its 150th birthday on October 28. In 2010, Bloomingdale launched its exclusive upscale store by the name of Bloomingdale The Outlet and also first international Bloomingdale store is opened in Dubai.

In 2011 both Macy’s and Bloomingdale started e-commerce sales to more than 100 countries. In 2015, Macy’s purchased Bluemercury, which was a specialty store with beauty and spa services and in 2016, there were 122 stores. In 2018, Macy’s invested in more than 50 stores to improve the services.

Current Business and Investment of Macy’s

Macy’s is one of the most popular retail brands in the US and also the world. The company manages retail of numerous segments that include apparel, jewelry, cosmetics, accessories, home furnishings, and consumer goods. The famous brands include Macy’s, Bloomingdale, and Bluemercury that offers premium

  • Apparel for men, women, and children
  • Fragrances
  • Shoes
  • Jewelry
  • Cosmetics
  • Household furnishings and other accessories.

Macy’s has many subsidiaries, and one of them is FDS Bank that manages the credit processing, customer service and credit marketing services, and collections. The private labels offered by Macy’s include Aqua, Alfani, Epic Threads, Home Design, Holiday Lane, Hudson Park, Material Girl, and American Rag.

The intimate apparel segment, along with women’s accessories, cosmetics, and shoes, contributes to 40% of the total revenue. The women’s apparel accounts for 25%, followed by men and children apparel at 20%, and the rest of the revenue is attributed to home and other miscellaneous products. Macy’s spends heavily on advertising and promotion, and nearly $1.2 billion was spent in 2018 on advertising across print and television media, direct mail, and other marketing channels.

Macy’s has more than 800 stores in the US that are spread all over the country. Almost 30% of stores come in North Eastern US, 20% in South and North Central, while 15% in Northwest and Southwest. Macy’s posted net sales of $24.56 billion in 2019 and Macy’s stores accounted for 65% of the total sales, followed by Macy’s digital at 23%, Bloomingdale at 8%, Bloomingdale digital at 3%, and Bluemercury at 1%.

Risk and Potential in Macy’s Environment

Macy’s has a strong brand name in the retail and department store sector, but in past years, due to increases in competition, Macy’s is seeing an 11% drop in revenue and also 27% decline in net income from 2014 to 2018. Macy’s posted revenue of $25 billion in 2019, along with an increase in in-store sales of 1.7%. However, the net income was reported $1.1 billion, with a 29% decline.

Macy’s is a prominent name in the retail and lifestyle industry, and SWOT analysis is a common management tool that can allow a big company such as Macy’s to examine its internal and external factors and set a proper measure for attaining business efficiency. The SWOT analysis of Macy’s is given by

  • Strengths

Macy’s has a massive following and customer base in the retail sector. The company is over 150 years old, which certifies its success. Macy’s has over 800 stores in the US, which ensures the convenience and availability of products to the customers. The Macy’s Herald Square is the world’s largest retail store. The company has a wide range of premium private labels and offers a broad assortment of apparel, footwear, cosmetics, jewelry, and household products. Macy’s also offers online shopping and exports to over 100 countries.

  • Weaknesses

Macy’s depends heavily on revenue and sales from the US and has less footprint in global markets as compared to other big retail stores. The market share of Macy’s is declining, with increased competition in the retail sector. Macy’s also needs to spend more on research and gathering insights on changing customers preferences and wants.

  • Opportunities

Macy’s has all the opportunity to grow as the retail industry will grow. The company must look to diversify its portfolio of products and focus on e-commerce as the future of shopping apart from brick and mortar stores is online shopping. Macy’s can also look to expand business in emerging markets where there is a certain fan base of exclusive retail stores such as Macy’s.

  • Threats

Macy’s has to face a constant and tough challenge from its competitors that includes Walmart, Amazon, Kroger, Coles Group, Sams Club, eBay, JC Penney, and Costco. The financial performance of Macy’s is affected by economic downturns and government policies.

Stock Analysis of Macy’s

Macy’s Inc. is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘M.’ The company is listed under the ‘Retail Trade’ Sector, and the industry is ‘Department Stores’.

The all-time high share price of Macy’s was $72.80 on July 16, 2015, and the average price in the last 52 weeks is $11.55.

Macy’s reported record quarterly losses in revenue, which was almost $3.6 billion due to Coronavirus pandemic that has forced the closure of businesses and asked people to stay at home and rely on online shopping as compared to physical shopping. Already in the first quarter, Macy’s posted a net loss of $11.53 billion.

The businesses have started to reopen, but Covid-19 continues to impact lives and economic systems across the systems. Macy’s decided to implement several cost-cutting measures and lay off nearly 4000 employees in many corporate and management positions. In the first quarter, Macy’s lost $2.03 per share, and net sales fell to $3.01 billion at 45%. Analysts predict that the earnings of Macy’s will further decline in this fiscal year.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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