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{{hide_logo|path=[[Image:Macy's logo.PNG|left|150px]]}} {{hide_logo|path=[[Image:Macy's logo.PNG|left|150px]]}}
-'''Macy’s Inc.''' ([[NYSE Euronext (NYX)|NYSE]]:M) is a clothing retailer selling men's, women's and children's clothes and accessories through 850 stores nationwide. Macy's Inc is divided into mid-tier Macy's and Bloomingdale's, an upper-tier store that sells more exclusive items. Macy's posted a net loss of over $4 million in fiscal 2009<ref name=M11>{{cite 10k| ticker=M| year=2008| form=Annual Report| link=http://www.wikinvest.com/stock/Macy%27s_Inc._%28M%29/Filing/10-K/2009/F1916513 | pg=15}}</ref>, a symptom of a challenging retail industry caused by the [[2007 Credit Crunch|2007 credit crunch]] as well as the [[subprime lending]] crisis.+'''Macy’s Inc.''' ([[NYSE Euronext (NYX)|NYSE]]:M) is a clothing retailer selling men's, women's and children's clothes and accessories through over 850 stores nationwide. Macy's Inc is divided into mid-tier Macy's and Bloomingdale's, an upper-tier store that sells more exclusive items.<ref name=M11>{{cite 10k| ticker=M| year=2008| form=Annual Report| link=http://www.wikinvest.com/stock/Macy%27s_Inc._%28M%29/Filing/10-K/2009/F1916513 | pg=15}}</ref>
-The credit crunch has led to a decrease in consumer confidence, causing decreases in store sales and profits for this fiscal year. Bloomingdale's, as the higher-end chain, was hit especially hard during the third and fourth quarters of the fiscal year. Private label brands constituted 19% of total 2008 sales. Private brands have been receiving increased attention from retailers due to the increased control they have over the production and distribution of their own line. Also, they tend to have a higher profit margin than third-party goods. The credit crunch has also led to an increase in credit card balances and subsequently delinquent accounts. Macy's, as one of many retailers that extend a line of credit to their consumers, is thus susceptible to the risks inherent in a higher percentage of delinquent credit card balances. However, in October 2005 Macy's sold its credit business to [[Citigroup (C)]]. As part of their agreement, Macy's shares any profits and losses related to the credit business. Therefore, Macy's exposure to increased credit card debt is mitigated through its partnership. +Private brands have been receiving increased attention from retailers due to the increased control they have over the production and distribution of their own line. Also, they tend to have a higher profit margin than third-party goods. This has impacted Macy's product mix as retailers move towards increasing private brand offerings. The credit crunch has also led to an increase in credit card balances and subsequently delinquent accounts. Macy's, as one of many retailers that extend a line of credit to their consumers, is thus susceptible to the risks inherent in a higher percentage of delinquent credit card balances. Therefore, Macy's exposure to increased credit card debt is mitigated through its partnership.
==Business Overview== ==Business Overview==
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Macy's and [[Luxury Consumption|upscale]] Bloomingdale's sell men's, women's and children's apparel and accessories, cosmetics and home furnishings. Aside from its brick-and-mortar stores Macy's also operates macys.com, bloomingdales.com and Bloomingdale's by Mail in addition to an online bridal registry.<ref name=M10 /> Macy's mostly sells products from third-party manufacturers, however the company also produces a number of private brands, such as Alfani and Club Room.<ref name=M10 /> <ref name=M15>{{cite 10k| ticker=M| year=2009| form=Annual Report| link=http://www.macysinc.com/Investors/vote/2009_ar.pdf}}</ref> Macy's and [[Luxury Consumption|upscale]] Bloomingdale's sell men's, women's and children's apparel and accessories, cosmetics and home furnishings. Aside from its brick-and-mortar stores Macy's also operates macys.com, bloomingdales.com and Bloomingdale's by Mail in addition to an online bridal registry.<ref name=M10 /> Macy's mostly sells products from third-party manufacturers, however the company also produces a number of private brands, such as Alfani and Club Room.<ref name=M10 /> <ref name=M15>{{cite 10k| ticker=M| year=2009| form=Annual Report| link=http://www.macysinc.com/Investors/vote/2009_ar.pdf}}</ref>
-===Business Growth===+===News Updates===
 +*In the beginning of June, 4,000 union workers pressured Macy's that they would go on strike. Macy's and the union were able to reach a tentative contract agreement. The new contract includes wage increases by $3.05 over the next five years and lower health insurance plans.<ref name=strike>[http://cityroom.blogs.nytimes.com/2011/06/16/no-strike-at-macys/ The New York Times, "No Strike at Macy’s," 06/16/2011]</ref>
-[[Image:M_geo.png|thumb|375px|right|In 2009, Macy's had stores in evenly-distributed regions of the United States.<ref name=10k09item2>[http://www.wikinvest.com/stock/Macy%27s_Inc._%28M%29/Filing/10-K/2010/F53541762 M 2009 10-k, Item 2: Properties, page 12]</ref>]]+===Business Growth===
====Fiscal Year 2010 Results (ended January 29th, 2011)==== ====Fiscal Year 2010 Results (ended January 29th, 2011)====
-Net sales were $25.0 billion, which is an increase of 6.4% from last year. Net income increased 157% to $847 million. <ref name=q4fy2010> http://phx.corporate-ir.net/phoenix.zhtml?c=84477&p=RssLanding&cat=news&id=1531128</ref>+*'''[[Net sales]] were $25.0 billion, which is an increase of 6.4% from fiscal 2009.'''
 +*'''[[Net income]] increased 157% to $847 million.'''<ref name=q4fy2010> http://phx.corporate-ir.net/phoenix.zhtml?c=84477&p=RssLanding&cat=news&id=1531128</ref>'''
===Business Segments=== ===Business Segments===
====Macy's==== ====Macy's====
-Macy's is one of the oldest department stores in the United States and an iconic retailing brand. It operates 810 stores nationwide and offers a huge array of top brands in all retailing categories. Events like the Macy's Thanksgiving Day parade, 4th of July Fireworks, holiday traditions, and celebrity appearances all contribute to the nationwide recognition of the Macy's name.+Macy's is one of the oldest department stores in the United States and an iconic retailing brand. It operates 810 stores nationwide and offers a huge array of top brands in all retailing categories. Events like the Macy's Thanksgiving Day parade, 4th of July Fireworks, holiday traditions, and celebrity appearances all contribute to the nationwide recognition of the Macy's name.<ref name=M14>{{cite web| title=Macy's F1Q09 (Qtr End 5/2/09) Earnings Call Transcript| url=http://seekingalpha.com/article/137516-macy-s-f1q09-qtr-end-5-2-09-earnings-call-transcript?page=-1}}</ref>
- +
-Macy's started the My Macy's initiative in 2008. This initiative is geared towards increasing sales through specifically altering the merchandise in individual stores to best suit the demographics of the surrounding areas. Macy's is in the process of expanding the My Macy's program throughout the entire country. <ref name=M14>{{cite web| title=Macy's F1Q09 (Qtr End 5/2/09) Earnings Call Transcript| url=http://seekingalpha.com/article/137516-macy-s-f1q09-qtr-end-5-2-09-earnings-call-transcript?page=-1}}</ref>+
====Bloomingdales==== ====Bloomingdales====
-Bloomingdales is a nationwide upscale department store with 40 stores across the U.S. Bloomingdales will launch 4 outlet stores on the east coast in 2010 along with its first international stores in Dubai. Bloomingdales positions itself as an upscale contemporary division of Macy's Inc. carrying labels such as Louis Vuitton, Armani, and Burberry. It has personal shoppers, lounges, and top fitting rooms for the most discerning customers.+Bloomingdales is a nationwide upscale department store with 40 stores across the U.S. Bloomingdales positions itself as an upscale contemporary division of Macy's Inc. carrying labels such as Louis Vuitton, Armani, and Burberry. It has personal shoppers, lounges, and top fitting rooms for the most discerning customers.
====Online==== ====Online====
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===Credit Card Losses Mitigated Through Partnership With Citigroup=== ===Credit Card Losses Mitigated Through Partnership With Citigroup===
-The [[credit crunch|2007 Credit Crunch]] has made it increasingly difficult for people to secure financing through methods such as borrowing against their homes. Therefore, many consumers have resorted to credit cards to make purchases. As of the third quarter of 2007, credit card balances rose by 7%, compared to an average of 2% a year for the previous six years.<ref name=M8>{{cite web| title=The Coming Credit-Card Crunch| url=http://www.smartmoney.com/spending/deals/the-coming-credit-card-crunch-22356/?hpadref=1| author=Aleksandra Todorova}}</ref> In addition, delinquency rates for the same period were 4.47%, compared to 4.24% during the same period the previous year.<ref name=M8 /> As credit card balances rise, so do the proportion of delinquent balances. This is bad news for retailers that extend lines of credit to their consumers. Macy's, however, has an advantage in the sense that it shares profits and losses with Citibank, meaning it does not suffer the full blow from an unpaid credit balance. In addition, Macy's benefits from letting Citibank--which has more experience in handling credit--extend credit to Macy's customers. This allows Macy's to focus more energy on its retail business.+The [[credit crunch|2007 Credit Crunch]] has made it increasingly difficult for people to secure financing through methods such as borrowing against their homes. Therefore, many consumers have resorted to credit cards to make purchases. As credit card balances rise, so do the proportion of delinquent balances. This is bad news for retailers that extend lines of credit to their consumers. Macy's, however, has an advantage in the sense that it shares profits and losses with Citibank, meaning it does not suffer the full blow from an unpaid credit balance. In addition, Macy's benefits from letting Citibank--which has more experience in handling credit--extend credit to Macy's customers. This allows Macy's to focus more energy on its retail business.
===Increases in [[Commodities|Commodity]] Prices Will Raise Clothing Retailer Prices=== ===Increases in [[Commodities|Commodity]] Prices Will Raise Clothing Retailer Prices===
-In 2010, [[cotton]] consumption exceeded cotton production for the fifth year in the row, making cotton prices increase by 80.5% from last year.<ref name=commodities>http://seekingalpha.com/article/238731-more-evidence-of-inflation-retailers-report-escalating-commodity-prices</ref> <ref name=cotton>[http://www.bloomberg.com/news/2010-11-16/gap-wal-mart-clothing-suppliers-raise-prices-on-terrifying-cotton-costs.html Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton Prices]</ref> In 2009, [[natural disasters]] also severely damaged crops in many large cotton producer countries, such as China, India, and Pakistan. This led to decreases in cotton exports from these countries and increases in cotton imports as these countries sought to supplement their supply of cotton. <ref>http://www.thegovmonitor.com/world_news/asia/recession-drought-hail-reduce-cotton-acreage-in-china-12256.html</ref><ref>[http://money.cnn.com/2010/09/09/news/economy/cotton_shortage_could_inflate_clothing_prices/index.htm CNN Money - Cotton Shortage Could Inflate Clothing Prices]</ref> With limited cotton supplies and rising prices, retailers will either have to absorb these higher material costs, restructure the composition of their clothing to have less cotton, or pass these higher costs to its consumers. Higher clothing prices or lower quality clothing could discourage consumer spending, resulting in decreased net sales. However, adult or teen clothing retailers may not be too adversely affected as their clothing (which is usually 30-40% cotton based) has more flexibility in their composition and thus, costs.+[[Cotton]] consumption exceeded cotton production for the fifth year in the row, making cotton prices increase by 80.5% from last year.<ref name=commodities>http://seekingalpha.com/article/238731-more-evidence-of-inflation-retailers-report-escalating-commodity-prices</ref> <ref name=cotton>[http://www.bloomberg.com/news/2010-11-16/gap-wal-mart-clothing-suppliers-raise-prices-on-terrifying-cotton-costs.html Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton Prices]</ref> [[Natural disasters]] also severely damaged crops in many large cotton producer countries, such as China, India, and Pakistan. This led to decreases in cotton exports from these countries and increases in cotton imports as these countries sought to supplement their supply of cotton. <ref>http://www.thegovmonitor.com/world_news/asia/recession-drought-hail-reduce-cotton-acreage-in-china-12256.html</ref><ref>[http://money.cnn.com/2010/09/09/news/economy/cotton_shortage_could_inflate_clothing_prices/index.htm CNN Money - Cotton Shortage Could Inflate Clothing Prices]</ref> With limited cotton supplies and rising prices, retailers will either have to absorb these higher material costs, restructure the composition of their clothing to have less cotton, or pass these higher costs to its consumers. Higher clothing prices or lower quality clothing could discourage consumer spending, resulting in decreased net sales. However, adult or teen clothing retailers may not be too adversely affected as their clothing (which is usually 30-40% cotton based) has more flexibility in their composition and thus, costs. In addition, raising [[commodities|commodity]] prices in other areas will also raise costs for retailers. While premium price and established brands may be able to pass their higher costs to their consumers, value based companies may not fare as well and may suffer from lower profit margins.<ref name=commodities/>
- +
-In addition, raising [[commodities|commodity]] prices in other areas will also raise costs for retailers. The price of shipping a 40-foot dry container from China to the US has increased by 90% since 2009. [[Lumber]] and [[coal]] prices increased 36.3% and 23.7% from last year, respectively, while [[oil]] prices increased by 40% in early 2010 but has now decreased back to a steady single digit increase for the year.<ref name=commodities/> While premium price and established brands may be able to pass their higher costs to their consumers, value based companies may not fare as well and may suffer from lower profit margins.<ref name=commodities/>+
==Competition== ==Competition==
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In terms of price point, Macy's faces stiffest competition from [[J.C. Penney (JCP)]] and [[Sears Holdings (SHLD)]]: In terms of price point, Macy's faces stiffest competition from [[J.C. Penney (JCP)]] and [[Sears Holdings (SHLD)]]:
-*J.C. Penney sells goods at a slightly lower price point than Macy's does. Since more than half its 2009 sales came from private labels, J.C. Penney places considerable effort in developing its own brands, which though they have a higher profit margin than third-party brands, they do not have the same name recognition that would come from a national or international line. In addition, private brands are usually produced to appeal to the greatest number of customers, meaning their designs tend to be more conservative than third-party brands. These safer, more tried-and-true designs can present a problem when they do not excite or interest consumers enough to compel them to spend money. As of fiscal 2009, Macy's had 850<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.2]</ref> stores in the United States whereas J.C. Penney had 1,008.<ref>[http://media.corporate-ir.net/media_files/irol/70/70528/2009IAR/2009IAR/HTML2/default-twopage.htm JC Penny Annual Report p. 24]</ref>+*J.C. Penney sells goods at a slightly lower price point than Macy's does. J.C. Penney places considerable effort in developing its own brands, which though they have a higher profit margin than third-party brands, they do not have the same name recognition that would come from a national or international line. In addition, private brands are usually produced to appeal to the greatest number of customers, meaning their designs tend to be more conservative than third-party brands. These safer, more tried-and-true designs can present a problem when they do not excite or interest consumers enough to compel them to spend money. <ref>[http://media.corporate-ir.net/media_files/irol/70/70528/2009IAR/2009IAR/HTML2/default-twopage.htm JC Penny Annual Report p. 24]</ref>
-*Sears Holdings is composed of Sears, Kmart and Land's End. Sears sells home appliances, garden and fitness equipment and electronics. Kmart sells similar goods, along with home furnishings and clothing. Land's End sells clothes and accessories, primarily online and through catalogs. As a discount store, Kmart's price point is lower than that of Macy's, attracting a lower-income consumer. Sears Holdings is more focused on appliances and electronics, whereas Macy's is more focused on apparel and accessories. Sears Holdings had 3,900 stores as of the end of fiscal year 2009. <ref>[http://www.searsholdings.com/invest/ Sears Investor Relations]</ref>, providing access to a much larger base of consumers than Macy's. The lower price point of Kmart stores also makes the chain more attractive to consumers looking to cut back on their spending considering the flagging American economy.+*Sears Holdings is composed of Sears, Kmart and Land's End. Sears sells home appliances, garden and fitness equipment and electronics. Kmart sells similar goods, along with home furnishings and clothing. Land's End sells clothes and accessories, primarily online and through catalogs. As a discount store, Kmart's price point is lower than that of Macy's, attracting a lower-income consumer. Sears Holdings is more focused on appliances and electronics, whereas Macy's is more focused on apparel and accessories. The lower price point of Kmart stores also makes the chain more attractive to consumers looking to cut back on their spending considering the flagging American economy.
Luxury department stores such as [[Saks (SKS)]] operate at a higher price point, attracting a clientele with more disposable income. Discount stores operate at a much lower price point, attracting less affluent consumers. Macy's is distinct from warehouse stores in that it does not sell goods in bulk and operates at a higher price point. Luxury department stores such as [[Saks (SKS)]] operate at a higher price point, attracting a clientele with more disposable income. Discount stores operate at a much lower price point, attracting less affluent consumers. Macy's is distinct from warehouse stores in that it does not sell goods in bulk and operates at a higher price point.
-Below are charts comparing Macy's to the different retailers it competes with through the operational metrics of net or total sales and net income for fiscal year 2009(a loss is written in parenthesis). 
- 
- 
-{| border="1" cellpadding="5" style="border-collapse:collapse" 
-|+ '''Macy’s Comparison to other Department Stores 
-|- bgcolor=lightblue 
-! 
-!Macy’s 
-![[Bon-Ton Stores]] 
-![[JC Penney]] 
-![[Kohl’s]] 
-![[Nordstrom]] 
-![[Dillard's]] 
-![[Saks]] 
-![[Sears]] 
-|- 
-|Net Sales ($ millions) 
-|23,489<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|3,034<ref>[http://files.shareholder.com/downloads/BONT/956662665x0x381740/8924DDD1-F481-452D-B0D6-BD1DE826A7FD/FINAL_Form_10-K_typeset_version_.pdf Bon Ton 10k p.19]</ref> 
-|17,556<ref>[http://media.corporate-ir.net/media_files/irol/70/70528/2009IAR/2009IAR/HTML2/jc_penney-ar2009_0024-twopage.htm JC Penny 2009 Annual Report p.24]</ref> 
-|17,178<ref>[http://www.kohlscorporation.com/InvestorRelations/pdfs/Reports/2009AnnualReportForm10K.pdf Kohl's 10k p.22]</ref> 
-|8,627<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY5NjJ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Nordstrom 10k p.28]</ref> 
-|6,226<ref>[http://files.shareholder.com/downloads/DDS/956657697x0x366733/EAAD62D9-2618-48CA-8A21-CC412699269A/2009ar.pdf Dillards 2009 Annual Report p.62]</ref> 
-|2,631<ref>[http://www.saksincorporated.com/investorrelations/documents/200910Kfiling.pdf Saks 10k p.25]</ref> 
-|44,043<ref>[http://www.searsholdings.com/invest/docs/SHC_2009_Form_10-K.pdf#pagemode=thumbs&page=1&zoom=100,0,0 Sears 2009 Annual Report p.22]</ref> 
-|- 
-|Net Income ($ millions) 
-|350<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|(4)<ref>[http://files.shareholder.com/downloads/BONT/956662665x0x381740/8924DDD1-F481-452D-B0D6-BD1DE826A7FD/FINAL_Form_10-K_typeset_version_.pdf Bon Ton 10k p.19]</ref> 
-|251<ref>[http://media.corporate-ir.net/media_files/irol/70/70528/2009IAR/2009IAR/HTML2/jc_penney-ar2009_0024-twopage.htm JC Penny 2009 Annual Report p.24]</ref> 
-|991<ref>[http://www.kohlscorporation.com/InvestorRelations/pdfs/Reports/2009AnnualReportForm10K.pdf Kohl's 10k p.22]</ref> 
-|441<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY5NjJ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Nordstrom 10k p.28]</ref> 
-|68<ref>[http://files.shareholder.com/downloads/DDS/956657697x0x366733/EAAD62D9-2618-48CA-8A21-CC412699269A/2009ar.pdf Dillards 2009 Annual Report p.62]</ref> 
-|(58)<ref>[http://www.saksincorporated.com/investorrelations/documents/200910Kfiling.pdf Saks 10k p.25]</ref> 
-|235<ref>[http://www.searsholdings.com/invest/docs/SHC_2009_Form_10-K.pdf#pagemode=thumbs&page=1&zoom=100,0,0 Sears 2009 Annual Report p.22]</ref> 
-|- 
-|} 
- 
- 
-{| border="1" cellpadding="5" style="border-collapse:collapse" 
-|+ '''Macy’s Comparison to Specialty Stores 
-|- bgcolor=lightblue 
-! 
-!Macy’s 
-![[Aeropostale]] 
-![[AnnTaylor Stores (ANN)]]  
-![[Gap]] 
-![[Limited Brands]] 
-|- 
-|Net Sales ($ millions) 
-|23,489<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|2,230<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzgwODcwfENoaWxkSUQ9MzgxMDQwfFR5cGU9MQ==&t=1 Aeropostale 2009 Annual Report p.54]</ref> 
-|1,828<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA2MDN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Ann Taylor 2009 Annual Report]</ref> 
-|14,197<ref>[http://www.gapinc.com/public/documents/GPS_AR_09.pdf Gap 2009 Annual Report]</ref> 
-|8,632<ref>[https://materials.proxyvote.com/Approved/532716/20100329/CMBO_58396/HTML2/default.htm LTD 10k p.78]</ref> 
-|- 
-|Net Income ($ millions) 
-|350<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|229<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzgwODcwfENoaWxkSUQ9MzgxMDQwfFR5cGU9MQ==&t=1 Aeropostale 2009 Annual Report p.54]</ref> 
-|(18)<ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA2MDN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Ann Taylor 2009 Annual Report]</ref> 
-|1,102<ref>[http://www.gapinc.com/public/documents/GPS_AR_09.pdf Gap 2009 Annual Report]</ref> 
-|448<ref>[https://materials.proxyvote.com/Approved/532716/20100329/CMBO_58396/HTML2/default.htm LTD 10k p.78]</ref> 
-|- 
-|} 
- 
- 
-{| border="1" cellpadding="5" style="border-collapse:collapse" 
-|+ '''Macy’s Comparison to Mass Merchandisers 
-|- bgcolor=lightblue 
-! 
-!Macy’s 
-![[Walmart]] 
-![[Target]] 
-|- 
-|Net Sales ($ millions) 
-|23,489<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|408,214<ref>[http://cdn.walmartstores.com/sites/AnnualReport/2010/PDF/WMT_2010AR_FINAL.pdf Walmart 2010 Annual Report]</ref> 
-|65,357<ref>[http://thomson.mobular.net/thomson/7/3115/4260/document_0/TGT_AR09.pdf Target 2009 Annual Report p.83]</ref> 
-|- 
-|Net Income ($ millions) 
-|350<ref>[http://www.macysinc.com/Investors/vote/2009_ar.pdf Macy's 2009 Annual Report p.15]</ref> 
-|14,848<ref>[http://cdn.walmartstores.com/sites/AnnualReport/2010/PDF/WMT_2010AR_FINAL.pdf Walmart 2010 Annual Report]</ref> 
-|2,488<ref>[http://thomson.mobular.net/thomson/7/3115/4260/document_0/TGT_AR09.pdf Target 2009 Annual Report p.83]</ref> 
-|} 
{{clr}} {{clr}}

Revision as of 11:01, January 30, 2012


Macy’s Inc. (NYSE:M) is a clothing retailer selling men's, women's and children's clothes and accessories through over 850 stores nationwide. Macy's Inc is divided into mid-tier Macy's and Bloomingdale's, an upper-tier store that sells more exclusive items.[1]

Private brands have been receiving increased attention from retailers due to the increased control they have over the production and distribution of their own line. Also, they tend to have a higher profit margin than third-party goods. This has impacted Macy's product mix as retailers move towards increasing private brand offerings. The credit crunch has also led to an increase in credit card balances and subsequently delinquent accounts. Macy's, as one of many retailers that extend a line of credit to their consumers, is thus susceptible to the risks inherent in a higher percentage of delinquent credit card balances. Therefore, Macy's exposure to increased credit card debt is mitigated through its partnership.

Business Overview

Macy's and upscale Bloomingdale's sell men's, women's and children's apparel and accessories, cosmetics and home furnishings. Aside from its brick-and-mortar stores Macy's also operates macys.com, bloomingdales.com and Bloomingdale's by Mail in addition to an online bridal registry.[2] Macy's mostly sells products from third-party manufacturers, however the company also produces a number of private brands, such as Alfani and Club Room.[2] [3]

News Updates

  • In the beginning of June, 4,000 union workers pressured Macy's that they would go on strike. Macy's and the union were able to reach a tentative contract agreement. The new contract includes wage increases by $3.05 over the next five years and lower health insurance plans.[4]

Business Growth

Fiscal Year 2010 Results (ended January 29th, 2011)

  • Net sales were $25.0 billion, which is an increase of 6.4% from fiscal 2009.
  • Net income increased 157% to $847 million.[5]

Business Segments

Macy's

Macy's is one of the oldest department stores in the United States and an iconic retailing brand. It operates 810 stores nationwide and offers a huge array of top brands in all retailing categories. Events like the Macy's Thanksgiving Day parade, 4th of July Fireworks, holiday traditions, and celebrity appearances all contribute to the nationwide recognition of the Macy's name.[6]

Bloomingdales

Bloomingdales is a nationwide upscale department store with 40 stores across the U.S. Bloomingdales positions itself as an upscale contemporary division of Macy's Inc. carrying labels such as Louis Vuitton, Armani, and Burberry. It has personal shoppers, lounges, and top fitting rooms for the most discerning customers.

Online

Online sales are conducted through macys.com and bloomingdales.com.

Private Labels

Macy's portfolio of 15 private labels include Alfani, Charter Club, Hotel Collection and Club Room. These brands are only available at Macy's. [7]

Trends and Forces

Private Label Brands Benefits Both Consumers and Retailers

Private label brands are clothing lines whose design, production and distribution are controlled by the retailer itself. They are especially popular in department stores such as Macy's, J.C. Penney (JCP) and Saks (SKS). Private brands are an attractive choice for the retailer because they can produce exactly the pieces they want instead of looking for them among their suppliers. In addition, they have control over the quality and fabrication of garments under those lines so they are more able to control the costs of the goods. In addition, since they are produced and sold directly to the consumer, private brands are usually less expensive than brands from third-party companies. The lower price point makes private brands more attractive to low-income consumers as well as those hoping to curb their spending due to poor economic conditions. According to The Nielsen Co., private label sales have been increasing since the recession began and captured a high share of many departments of retail stores studied. In 2008, private label sales represented 16.3% of total retail sales in the U.S., up 5% from the previous year. [8] Private label sales represented 19% of Macy's 2009 sales, with the rest of sales coming from market brands. [9]

Credit Card Losses Mitigated Through Partnership With Citigroup

The 2007 Credit Crunch has made it increasingly difficult for people to secure financing through methods such as borrowing against their homes. Therefore, many consumers have resorted to credit cards to make purchases. As credit card balances rise, so do the proportion of delinquent balances. This is bad news for retailers that extend lines of credit to their consumers. Macy's, however, has an advantage in the sense that it shares profits and losses with Citibank, meaning it does not suffer the full blow from an unpaid credit balance. In addition, Macy's benefits from letting Citibank--which has more experience in handling credit--extend credit to Macy's customers. This allows Macy's to focus more energy on its retail business.

Increases in Commodity Prices Will Raise Clothing Retailer Prices

Cotton consumption exceeded cotton production for the fifth year in the row, making cotton prices increase by 80.5% from last year.[10] [11] Natural disasters also severely damaged crops in many large cotton producer countries, such as China, India, and Pakistan. This led to decreases in cotton exports from these countries and increases in cotton imports as these countries sought to supplement their supply of cotton. [12][13] With limited cotton supplies and rising prices, retailers will either have to absorb these higher material costs, restructure the composition of their clothing to have less cotton, or pass these higher costs to its consumers. Higher clothing prices or lower quality clothing could discourage consumer spending, resulting in decreased net sales. However, adult or teen clothing retailers may not be too adversely affected as their clothing (which is usually 30-40% cotton based) has more flexibility in their composition and thus, costs. In addition, raising commodity prices in other areas will also raise costs for retailers. While premium price and established brands may be able to pass their higher costs to their consumers, value based companies may not fare as well and may suffer from lower profit margins.[10]

Competition

Macy’s faces strong competition in the retail industry from other retailers in their geographic areas, including other traditional, moderate or luxury department stores, specialty stores, general merchandise stores, off-price and discount stores and other forms of shopping including the Internet, mail order catalogs and television. Retailers competing with Macy’s include:

In terms of price point, Macy's faces stiffest competition from J.C. Penney (JCP) and Sears Holdings (SHLD):

  • J.C. Penney sells goods at a slightly lower price point than Macy's does. J.C. Penney places considerable effort in developing its own brands, which though they have a higher profit margin than third-party brands, they do not have the same name recognition that would come from a national or international line. In addition, private brands are usually produced to appeal to the greatest number of customers, meaning their designs tend to be more conservative than third-party brands. These safer, more tried-and-true designs can present a problem when they do not excite or interest consumers enough to compel them to spend money. [15]
  • Sears Holdings is composed of Sears, Kmart and Land's End. Sears sells home appliances, garden and fitness equipment and electronics. Kmart sells similar goods, along with home furnishings and clothing. Land's End sells clothes and accessories, primarily online and through catalogs. As a discount store, Kmart's price point is lower than that of Macy's, attracting a lower-income consumer. Sears Holdings is more focused on appliances and electronics, whereas Macy's is more focused on apparel and accessories. The lower price point of Kmart stores also makes the chain more attractive to consumers looking to cut back on their spending considering the flagging American economy.

Luxury department stores such as Saks (SKS) operate at a higher price point, attracting a clientele with more disposable income. Discount stores operate at a much lower price point, attracting less affluent consumers. Macy's is distinct from warehouse stores in that it does not sell goods in bulk and operates at a higher price point.



References

  1. M 2008 Annual Report pg. 15  
  2. 2.0 2.1
  3. M 2009 Annual Report  
  4. The New York Times, "No Strike at Macy’s," 06/16/2011
  5. http://phx.corporate-ir.net/phoenix.zhtml?c=84477&p=RssLanding&cat=news&id=1531128
  6. Macy's F1Q09 (Qtr End 5/2/09) Earnings Call Transcript.
  7. Macy's 2009 Annual Report p.25
  8. Private Label Manufacturers Ass.
  9. Macy's Factbook
  10. 10.0 10.1 http://seekingalpha.com/article/238731-more-evidence-of-inflation-retailers-report-escalating-commodity-prices
  11. Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton Prices
  12. http://www.thegovmonitor.com/world_news/asia/recession-drought-hail-reduce-cotton-acreage-in-china-12256.html
  13. CNN Money - Cotton Shortage Could Inflate Clothing Prices
  14. 14.0 14.1 14.2 14.3 14.4 14.5 M 2008 Annual Report pg. 4  
  15. JC Penny Annual Report p. 24
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