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Running Head: Macy’s Inc.
Hannah Maritz
Liberty University
Macy’s Inc.
October 14, 2021
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Running Head: Macy’s Inc.
Executive Summary
This study investigates Macy's and its financial reporting to identify the strengths and
weaknesses in its internal controls for regulatory compliance. The study explains how the
company's organizational structure is adequate for dealing with the risks associated with
regulatory compliance. According to the study, Macy's is well prepared to overcome any
potential obstacles in fulfilling compliance standards with its existing organizational structure.
With an audit committee overseeing the business's financial reporting, audit activities, and
internal control, the company can handle all potential risks associated with the requirement to
comply with financial laws and standards established by regulatory authorities. As a result, the
danger of legal action for noncompliance is low. The second section of the study discusses the
company's financial reports and any flaws in the reports. Several elements in the reports raise
questions about the company's reporting, according to the study. The significant changes in
certain cost items draw notice. Where there are frequent changes in cost categories, the
likelihood of fraud or noncompliance is considerable. As a result, although the reports make
mention of these things, it would be wise for the business to offer additional information to
remove any doubts regarding these items.
Existing Mission, Objectives, and Strategies
Rowland Hussey Macy, a New York businessman, started Macy in 1851 and it quickly
grew to be one of the world's greatest stores. Macy's is a well-known American department store
company that sells everything from women's and men's fashion to appliances and children's
apparel, as well as home furnishings. As well as having an online store, Macy's ships its
merchandise to over 200 different countries across the world (Macy’s 2021).
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Macy's mission statement is: "Our goal is to be a retailer with the ability to see
opportunity on the horizon and have a clear path for capitalizing on it. To do so, we are moving
faster than ever before, employing more technology, and concentrating our resources on those
elements most important to our core customers" (Macys, 2021). Mission statements from
companies show that their goal is managing their ability to anticipate opportunities in the future
while also forging a course for adjusting essential factors. To guarantee that their processes are as
efficient as possible gives the firm plenty of time.
Macy's objectives made a significant investment in the technology platforms to reach the
internet consumer base that others have long concentrated on since big online retailers like
Amazon are pulling foot traffic away from brick-and-mortar shops. Macy's sales grew to $1.33
billion in the fourth quarter of 2018 from $475 million the year before, with a net profit of $1.33
billion (Moin, 2018). This momentum was maintained by the CEO's announcement of business
objectives to achieve their desired outcomes. Jeff. According to Macy's mission statement, "a
battery of growth initiatives" may be observed, "in the company's online orders increasing via
vendor direct-to-consumer deliveries known as "drop-shipping" speeding up the development of
Macy's Backstage off-price format, and monetizing unproductive real estate" (Moin,2018).
The strategic objectives of Macy's Inc. are clear and uncomplicated. The organization's
primary objective is to attract, retain, and develop the best retail sector personnel. A tailored
goods assortment and shopping experience are important to the company, and it "clearly realizes
that the client is key" (Macy's, 2021). Macy's conduct has aligned with and lived up to its
purpose, vision, values, and core strengths by utilizing more technology and focusing resources
on workers and consumers. From the beginning, their organizational behavior has been shown to
represent diversity and inclusiveness as well as professional advancement opportunities,
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industry-leading innovation, cooperation, and leadership. To create a company culture that
supports this determination, their code of conduct integrates and promotes all of the values put
out in this review as soon as new employees and vendors are brought on board. Because of this,
Macy's has created a work atmosphere where innovation, diversity, social responsibility, and
other progressive principles are not only embraced but also acknowledged. It has therefore been
shown that the organization has lived true to its purpose, vision, and values once more (Macy's,
2021).
New Mission Statement
The new mission statement for Macy's should be "To brighten every man, woman and
child's day throughout the globe by offering excellent apparel for the mind, body, and spirit that
is inexpensive and easily accessible." As a result, the newly formulated statement would
effectively incorporate all nine elements of a great goal statement. To begin with, we have
customers. This part of the goal statement explains who the company’s customers are; one can
discern those men, women, boys, girls, and individuals of all colors who want a wide selection of
apparel at a reasonable cost make up the company’s customer base. (2) Products or services: This
part of the mission statement describes the firm’s main products or services. That they have so
many different items to choose from shows how diverse their customer base is. (3) Markets: This
part of the mission statement describes where the company competes, regionally. With the
mention of all individuals all over the globe, it is obvious that Macy's is a global company. (4)
Technology: This part of the mission statement refers to whether or not the business is
technologically contemporary. The statement of being able to manufacture worldwide,
emphasizes that they have the technology and the resources to expand their reach any place in
the globe. (5) Concern for survival, expansion, and profitability: This part of the mission
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statement questions whether the company is dedicated to the growth and financial soundness. By
saying that they want to brighten the day of all people, indicates that they are keen to enhance the
lives and communities of their customers and with them being a worldwide company, this means
that they are trying to make the world a better place. (6) Philosophy: This part of the mission
statement refers to the organization’s fundamental beliefs, values, ambitions, and ethical
objectives of the business. This is defined by how they want to offer the finest goods for the
body, mind, and spirit of each person that utilizes their products. (7) Self-concept: This element
of the mission statement defines the firm’s unique competency or main competitive advantage.
This is demonstrated by how they can offer the finest goods for anyone’s unique requirements
promptly and at a reasonable price. (8) Concern for public image: This element of the mission
statement shows the firm’s response to social, community, and environmental issues. Macy's
aims to offer everything that you may desire in an apparel that is ideal for the globe. (9) Concern
for employees: this element of the mission statement discusses whether or not employees are a
valued asset of the business. By delivering the best for the client, involves taking care of your
workers to guarantee that they are generating the best for each customer.
Analysis of Existing Business Model
There are many external and internal facets to the Macy business model, which shows
how the company plans to do business. The majority of Macy's business model is summarized
and influenced by the significant corporate social responsibility commitment of the firm.
Nowadays, corporate social responsibility is critical, popular, and well-known for the benefits it
provides to businesses. Aside from that, Macy's is dedicated to achieving long-term success by
offering consumers what they want while also being socially responsible. Macy's Inc. now views
the mass-market strategy as a viable business model. During my time at Macy's, I learned about
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ideals like fashion and luxury, which were often linked with high-priced items. It's changed
dramatically and is now designed to appeal to people from all walks of life. When it comes to
"Last Act" goods, you'll find discounts ranging from 60 to 90 percent off regular prices. Among
other lower-priced retail shops, Macy's Backstage is a competitor of Marshalls, T.J. Maxx, and
Ross. This reimagined business strategy targets both online and in-store consumers. I've had to
take back goods from customers who mostly use mobile applications or shop online, which is a
fantastic chance to attract people who are too busy to come into the store but tend to spend more
when they pick up their online purchases. Clients may also buy online and pick it up from any
location they want. They may even opt to have their goods delivered while shopping in-store, all
to capture the attention of the public.
SWOT Matrix and Analysis
The SWOT Analysis is a basic technique that many companies use to give a fast internal
and external evaluation of where their company stands in their market. “The word “SWOT” has
no recognized origin. SWOT analysis has emerged as a critical technique for dealing with
complicated strategic circumstances by limiting the amount of information available to enhance
decision-making” (Helms & Nixon, 2010). Before we can go into what the SWOT is and how it
affects Macy's, we must first thoroughly comprehend what it is, why we use it, and how we can
utilize it to our benefit. “SWOT analysis has been utilized by numerous practitioners and
marketing researchers, and it is a common and popular technique among business marketing and
strategy students. Its ease of use and catchy acronym ensure its continued use in business and
beyond, as the tool is used to evaluate alternatives and difficult decision scenarios. The grouping
of internal and external problems is a common starting point for strategic planning in the
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corporate world. It may be built fast and can benefit from many perspectives as a brainstorming
exercise” (Helms & Nixon, 2010).
Strength
Macy's has a strong company brand value, which has allowed it to grow into one of the
biggest retail businesses and garner tremendous support throughout the years. With over 150
years and 800 shops, the business has evolved to be known as "America's Department Store,"
providing its consumers with more than simply daily shopping (Macy's, 2021). It is well-known
for providing high-quality services and products. Furthermore, it became a national brand in
2006 when nearly 400 shops changed their names to Macy's on a single day (Macy's, 2021). As a
result, it is one of the most well-known retail brands not only in the United States but also
throughout the globe.
Macy's omnichannel approach has allowed them to adapt and remain competitive as one
of the world's biggest retail shops. The advent of digital technology has altered the retail sector,
weakening the market attractiveness of different companies. Nonetheless, as a 158-year-old
department store, Macy's Inc has struggled and developed with the advancement of technology
by constantly updating its business strategy. For example, to enhance customer convenience, it
used sophisticated technology in its business operations through omnichannel consumer
experience (Macy's, 2021). The technology's characteristics include virtual and augmented
reality, which allows consumers to make better-educated choices about different goods. As a
result, their omnichannel approach has resulted in better consumer experiences.
Furthermore, Macy's has an effective marketing plan that allows them to reach many
people and acquire new consumers. To enhance the client experience, the business has used a
digital platform as a marketing tool. It promotes its goods via social media platforms such as
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Facebook, Twitter, and Instagram. According to Macy's (2021), it had over 1.2 million Facebook
followers by 2010. It has also embraced the usage of e-commerce to promote and increase its
sales. It announced its collaboration with Facebook on September 17, 2018, to bring about 150 e-
commerce companies to the market across nine locations (Macy's, 2021). The strategy would
introduce new customers to the company's goods and increase revenue. As a result, one of
Macy's primary assets is its excellent marketing strategy through digital channels.
Weakness
Macy's main issue is a drop in sales and revenues. Every day, sales at the company's
department shops decline. It recorded a 3.9 percent year-on-year sales decrease. Despite this,
sales fell by 0.6 percent in November and December 2019. (Valinsky, 2020). Similarly, in 2017
and 2018, its yearly sales in the United States department dropped by 20%. (Wu, 2019). This
year's sales are expected to fall even more. The company's decreasing revenues are a significant
problem.
Macy's has likewise seen a drop in market share. According to Thomas (2020), its stock
has dropped by more than 35% in the last year and is now trading at about $16.40. According to
Thomas (2020), this is a significant decrease since the equities traded in July of 2015 at about
$73.61. As a result, its current market value is about $5.1 billion, compared to $6.8 billion for
Kohl's shares (Thomas, 2020). The decrease in share prices in 2019 was significant, falling by
about 13% from the previous year (Wu, 2019). The company's declining stock prices are a
concerning element of its growth strategy.
Furthermore, Macy's is shutting shops due to a drop in sales. With the retail industry's
collapse and decreased sales, Macy's has also stated that it would shut 28 shops in various
regions, as well as one Bloomingdale store, in the coming months (Berk, 2020). However, due to
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poor performance, it intends to shut roughly 125 shops over the next three years (Garcia, 2020).
The 125 shops now account for about 1.4 billion in yearly sales and, if closed, would result in a
significant decrease in sales. In any event, Macy's planned store closures are a major
vulnerability for the business.
The absence of diversity in Macy's. Its only other line of operation is Bloomingdale's.
Although the business has expanded and improved in technology and customer experience over
the years, it lacks growth and variety. It should establish new subsidiaries, such as
Bloomingdale's, to enhance its performance and revenue. As a result, Macy's lacks various lines
of business activities, limiting its potential to expand.
Opportunities
Macy's has devised a three-year Polaris plan to achieve stability and prepare the company
for development. Macy's Inc. chairman and CEO Jeff Gennette said that the firm will concentrate
its efforts on strong areas of the business, directly address declining sectors, and seek new
earnings streams (Macy's, 2021). E-commerce, digital platforms, marketing, product
enhancements, and organizational structure alignment are all addressed in the plan. Polaris' plan
includes five key components that are expected to boost sales and overall growth.
The five elements of the Polaris strategy represent the firm's primary opportunity. It is
focusing on building customer connections by speeding up the customization of its content and
monetizing initiatives to grow the firm's loyalty program (Macy's, 2021). Furthermore, it intends
to accelerate digital growth to earn about $6 billion each year (Macy's, 2021). Similarly, it
intends to select high-quality clothes based on current trends, to build four $1 billion businesses.
It is continuously refining its retail portfolio by eliminating certain locations and growing others.
It is simplifying its structure by cutting employment by 9%, or about 2,000 jobs. Finally, the firm
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expects the Polaris approach to producing $1.5 billion in annual gross savings (Macy's, 2021). As
a result, the most important potential for the business is the creation and execution of the Polaris
strategy, which will allow it to acquire a competitive advantage in the market and restore steady
profitability.
Macy's also has the potential to enhance its marketing tactics and utilize more digital
advertising approaches. With the advent of technology, billions of individuals across the globe
may now be contacted in minutes. The business may capitalize on this potential by running ads
on social media sites such as Facebook, Instagram, LinkedIn, YouTube, and Google+. It may
also utilize advertisements such as landing pages, banners, and pop-ups on websites, emails, and
blogs to promote its goods. One possibility for Macy's to develop is to improve and extend its
marketing approach.
Threat
The primary danger to the business is competition in the retail sector. Nordstrom, Kohl's,
Sears Holdings, Dillard’s, TJ Maxx, JCPenney, Target, and Walmart are the industry's main
rivals. According to Setty (2019), Nordstrom's overall sales decreased from $3.67 billion to
$3.75 billion but remained consistent with the anticipated value. Even though most retail
merchants are suffering from decreasing sales, Nordstrom has achieved its anticipated worth.
Furthermore, Nordstrom's digital sales increased to 34 percent in 2019 from 31 percent in 2018,
while Macy's dropped (Setty, 2019). Furthermore, competitors such as Walmart and Costco often
provide discounts on their goods, posing a price-competition challenge to Macy's. In the retail
sector, many businesses provide comparable goods and methods, and therefore, competition is
fierce. As a result, Macy's faces intense competition in the retail sector.
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Running Head: Macy’s Inc.
Tariffs and other government regulations can pose a danger to the company. The business
issued a warning in 2019 about the danger to its sales if tariffs are implemented. Tariffs of 25%
were placed on Chinese imports by the government. In response to the issue, Macy's Chief
Executive Officer, Jeff Gennette, said that the tariffs imposed on the $200 billion worth of
products had an impact on the company's furniture division. If the government continues to
impose new regulations and taxes on retail goods, both imported and exported, the company's
sales may suffer. Various government regulations, such as tariffs, jeopardize the company's
profitability by reducing sales.
Several shops utilize better technology, which endangers the company's competitiveness.
Amazon, for example, employs sensors implanted in its shelves, allowing consumers to buy
goods without having to wait in line. The shops are like conventional grocery stores, except there
are no checkouts or queues since customers may scan goods bought and walk away (Cappetta &
Kent, 2019). Walmart, on the other hand, utilizes technology such as automated floor cleaners,
quick unloaders, and pickup towers to enhance the customer experience (Perez, 2019).
Competitive Forces Analysis
Political
Through its political action committee, Macy's participates in a variety of political
donations (PAC). In 2010, the business donated $50,000 to national and local political parties. In
2015, Macy's removed Donald Trump goods from its shops after he referred to immigrants and
people from other nations as murderers and rapists. According to Macy's, the business "stands for
diversity" and has zero tolerance for prejudice.
Economic
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The economic downturn caused by the COVID-19 epidemic has harmed a significant
number of companies functioning all over the globe. During the pandemic lockdown, Macy's had
to temporarily shut its department shops. Furthermore, the company's unemployment rate has
risen as a result of the company's deteriorating market circumstances. Before the epidemic,
Macy's was already in trouble. As part of Polaris, the store was already reducing its operations.
Several shops are set to shut permanently, and around 2,000 employees have already been let off
as part of efforts to cut Macy's "corporate and support function personnel by 9 percent." The firm
already announced the closure of 125 underperforming shops over the next three years, 29 of
which were already scheduled to close this year (Howland, 2020).
Social
Giving back to the community is an important element of Macy's business strategy.
Macy's donates to both local and national organizations to make a difference and have a good
effect. The business has given $56 million to charitable partners. It has collaborated with Make-
A-Wish since 2003, donating over $122 million to grant over 14,000 wishes for children with
severe illnesses. In 2018, Macy's helped individuals recover from floods, fires, storms, and
shootings by supporting two long-term disaster relief initiatives. In 2018, it also launched The
Big Give Back to collect money for the North Star Relief Fund, United Way, and other local
organizations. Customers, coworkers, and Macy's contributions helped generate $7.3 million for
the campaign. Since 1989, Macy's employees have donated over 3 million hours of community
service to thousands of local organizations. Macy's raised more than $3.5 million in March 2018
with the help of its employees and customers for local food banks, emergency food assistance
programs, and summer meals for children who typically rely on school meal programs through
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imaginative events such as good-natured competitions and "fashion shows for food," and teamed
up to deliver to homebound seniors and make and serve meals.
Technological
Technological advancements are critical to a company's success. It employs technology to
develop and enhance its online business platform to fortify its e-commerce platform. Macy's has
benefited from mobile technology, which has enabled its e-commerce sites to become extremely
successful and functional for consumers all over the globe. Macy's is the first American store to
utilize Cortexica, a visual search engine, to minimize the number of clicks between inspiration
and purchase to attract young consumers by allowing them to make purchases directly from their
phones.
Environmental
Macy's provides its customers with a better shopping experience every time they visit one
of its locations. To preserve the environment, Macy's believes in healthy and safe business
methods. As a result, it focuses on fulfilling consumer expectations while minimizing
environmental impact. To accomplish these objectives, Macy's has reduced its usage of paper,
restricted its use, and promoted waste product recycling to reduce environmental pollution and
improve efficiency. Macy's uses auto-boxing equipment to save packing material by up to 50%.
Through the installation of LED lights, the business has decreased its energy usage. It also
intends to expand the usage of renewable energy and to transition to the use of sustainable raw
materials in its operations.
Legal
The state, federal, and municipal governments issue the legal requirements or rules.
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These laws may and will change over time. The changes have the potential to have a major effect
on the business and its operations, either directly or indirectly. The business has a history of
being involved in legal disputes. Some of the legal proceedings against the company include
class action lawsuits for selling hazardous and unsafe manufactured shirts (Chung, 2008), data
breach class action suit in 2018, class action lawsuit for use of facial recognition software and
various other legal proceedings. These legal procedures have a significant detrimental effect on
the company's operations.
Financial analysis
Department shops like Macy's and Nordstrom dominate the American retail landscape.
It's no secret that retail experienced significant operationalization issues during the recession of
2007-2009. Due to financial limitations brought on by the crisis, retail establishments have fallen
behind in the worldwide market. Favorable tax legislation, on the other hand, reopened retail
establishments. Nordstrom and Macys have profited from the tax measures because of the
stability they've been able to maintain. Despite the variations in company structure and
procedures, both retailers have seen some increase in their store sales.
In their most current financial reports, Macy's predicts that net sales will rise to $23.9
billion in 2022, up from $23.2 billion now. In the range of $2.50 to $3.00 per share, the same
results are predicted. The same-store sales, on the other hand, are anticipated to drop to zero
percent (Swenson, 2019). According to a review of the company's last three years of
performance, its shares have decreased by 1% ("Macy's, Inc.", n.d.). According to the company's
financial report, it has lost half its worth in the last three to five years, with a current market
value of $5.1 billion.
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In 2018, inventories and in-store sales both fell by 6.5% at Nordstrom Inc. ("Nordstrom",
n.d.). According to the company's records, this was the result of a string of sales and inventory
failures. The profitability of off-price Rack retailers fell by 1.9% in the fourth quarter of 2018,
according to reports. In addition, the company's net income dropped by 13% in 2018. Digital
sales, on the other hand, increased by 7% in 2018. However, their yearly sales fell by 20%
between 2017 and 2018, while their entire stock fell by 57%. ("Nordstrom", n.d.).
Nordstrom appears to have a better chance of winning than Macy’s based on the research.
Nordstrom's e-commerce methods and cutting-edge technologies hold enormous promise. In the
$25 billion net sales range, Macy's has traditionally struggled, whereas Nordstrom's sales have
increased consistently since 2017. Furthermore, Nordstrom's approach includes both online and
in-store sales, so its inventory is enormous. Saks Fifth Avenue and Neiman Marcus are
expanding their store footprints. For example, Neiman-Marcus produces 31% of Nordstrom's
income. Given the significant investment in technology that their competitors are making,
Macy's and Nordstrom's future is uncertain.
Alternative Strategies
Macy's may change their marketing approach if they wish to attract business to their
shops while maintaining as many of those locations open as possible. They already have a
significant social media presence, indicating that they are well-positioned in the social media
arena. This would enable businesses to save money since conventional marketing is more costly
than social media marketing, as well as possibly reach more eyes due to the fast growth of the
worldwide social media user base. Increasing the number of people who see their marketing
material has the potential to drive more consumers into Macy's current retail locations.
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To compete directly with rival department stores, Macy's has the option to do so online.
They may shut the least lucrative of these sites and move their emphasis to the online retail
sector since they seem to be unable to depend on sales in their physical locations, as
demonstrated by the absence of foot traffic to these shops. Macy's already has a significant
internet and social media presence, so they would not be venturing into uncharted terrain, and
they already have a client base. This option will enable Macy's to handle the danger of internet
retailers entering their industry while simultaneously capitalizing on the potential of consumers
wanting a one-stop-shop for their products by providing their whole varied product range online.
Implementation strategy
Sales revenues are falling because of the Covid-19 pandemic's increased unemployment
and loss of buying power. Despite the devastating effect of the pandemic on companies, P&G has
maintained a solid performance. Macy's management can reverse the company's deteriorating
performance by implementing some of the changes that helped P&G whether the pandemic's
shocks. Macy's could consider changing its organizational structure as one of its initiatives.
Management should evaluate the existing structure and identify any flaws and rigidities that
restrict the company's capacity to react rapidly to economic shocks like the Covid-19. During the
reorganization, the firm should divest business divisions and product lines that have continuously
performed badly, negatively impacting the company's overall performance.
Another approach that Macy's could pursue is a collaboration with other companies in the
sector that have superior technical and other resource skills. To improve decreasing sales and
profitability, Macy's should find appropriate areas of cooperation with some of the top-
performing internet merchants. Macy's management should also adopt an agile supply chain for
its goods. Agility in the supply chain would guarantee that products are delivered to consumers
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on time and that stock is received when it is required. Additionally, management should simplify
the reporting hierarchy and management structure to prevent communication confusion,
particularly when workers get orders from several supervisors or managers. In addition, the
business should think about broadening its product lines. Macy's sells high-priced items to
consumers with high and middle incomes (Macy's, 2020). To attract low-income customers, the
business should also offer low-cost goods. The approach assisted P&G in retaining low-income
consumers by offering Tide at reduced costs.
Recommended Strategy
I suggest that Macy's change their marketing from conventional campaigns to social
media campaigns, and that they redirect a significant part of their existing marketing budget
away from traditional marketing such as commercials, print advertising, and billboards and
toward social media marketing. The remainder of the existing advertising budget may be
reduced, resulting in lower long-term expenses. This strategy appeals to both shareholders and
other stakeholders while sticking to the main future-oriented criteria that I outlined. This strategy
will take at least two years to fully execute. Macy's would need to gradually move money away
from current marketing channels and into social media channels. It is likely that Macy's has
agreements with TV networks and/or billboard firms that are still in effect but will not be
extended. Any television advertisements that have been partly financed will be completed to
avoid wasting any money that has already been committed to them. Because it is just a
reallocation of current money, this approach will not need any new financing.
If Macy’s runs my suggested strategy: online-only shops taking over the market formerly
served by Macy's. Macy's can live with Amazon without directly competing with them, in my
opinion, by continuing to concentrate on bringing consumers into their physical presence while
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just changing their approach on how to get people in the door. It's also conceivable that sales
continue to fall over time, and that the change in marketing approach has done nothing to
enhance Macy's market position. In that scenario, I believe they would have been out of luck
regardless of the approach they use now. Except for a proposal to shut it all down today and
reduce everyone's losses, nothing can truly stop customers who have lost their taste for Macy's.
Pro-Forma Financial Statement
Pro-forma financial statements are defined as financial reports that are based on previous
assumptions or circumstances to forecast future financial stability. Statements like these are used
to offer a perspective of the business to lenders or investors to demonstrate future predictions of
the company's market stability. Appendices include the following Pro-Forma Financial
Statements for Macy's: Pro-Forma Ratios, Pro-Forma Income Statement, Pro-Forma Balance
Sheet, and Pro-Forma Statement of Retained Earnings. According to the Pro-Forma financial
statements, Macy's financial situation will improve over the next several years with the help of
new initiatives. Over the following several years, the acquisition of additional property, plant,
and equipment, as well as the reduction of liabilities and the reduction of borrowing, will aid in
profit maximization. Revenues and gross profit are expected to rise faster than the cost of sales.
Over the next several years, bottom-line net income will rise at a consistent pace.
Net Present Value
The calculation's net present value is helpful when deciding on a new approach. The net
present value of the proposed strategy may be used to determine the profitability of a new project
or approach. Because this number is based on ambiguity and anticipated statistics, it must be
seen in the future and not as factual. Pro-Forma financial statement data is used to determine the
value of cash flow expected over a certain time.
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bloomingdales-store.html
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s-new-grocery-n839756
Chung, J., Chang, S., & Cruz, D. (2008, March 7). . Gothamist., Macy's escalators strike again
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of-closing-drive-an-average-of-80-less-sales-than-growth-stores-jpmorgan-2020-02- 05
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Running Head: Macy’s Inc.
Perez, S. (2019). Walmart to expand in-store tech including pickup towers for online orders and
robots. https://techcrunch.com/2019/04/09/walmart-to-expand-in-store-tech- including-
pickup-towers-for-online-orders-and-robots/
Setty, G. (2019). Nordstrom shares jump after earnings beat estimates.
https://www.cnbc.com/2019/11/21/nordstrom-jwn-earnings-q3-2019.html
Valinsky, J. (2020). Macy’s is closing 28 stores and a Bloomingdale’s store. CNN Business.
Retrieved from amp.cnn.com/cnn/2020/01/08/business/macys-store- closures/index.html
Wu, J. (2019). Retail stocks hit decade lows on the heels of Macy’s dismal earnings.
https://www.cnbc.com/2019/08/14/department-store-stocks-fall-on-the-heels-of- macys-
dismal-earnings.html
21
Running Head: Macy’s Inc.
Appendix:
TOWS/ Bivariate Strategy Matrix
Strength (Internal) 1.A powerful brand image
2. A wide range of brand products
3. Global Production and Distribution
Network Extensive
4. The Influence of a Single Strategy
5. Loyalty of Customers
Weakness (Internal) 1.Penetration outside of the United States
is limited.
2. a limited commercial portfolio
3. Rivalry
Opportunity (External) 1. Product Diversification
2. Expand International Presence
3. Increase E-Commerce
Treat (Extrenal) 1. Fierce Competition
2. Environmental activism
3. Economic Implications
Group Map
Gucci
High
22
Running Head: Macy’s Inc.
Macy’s
Price
Target
TJ Max
Low
Location
23
Running Head: Macy’s Inc.
Income Statement
Jan. 30, 2021 Feb. 01, 2020 Feb. 02, 2019
Income Statement [Abstract]
Net sales $ 17,346 $ 24,560 $ 24,971
Credit card revenues, net 751 771 768
Cost of sales (12,2 86) (15,1 71) (15,215)
Selling, general and administrative expenses (6,76 7) (8,99 8) (9,03 9)
Gains on sale of real estate 60 162 389
Restructuring, impairment, store closing and other costs (3,57 9) (354) (136)
Operating income (loss) (4,47 5) 970 1,738
Benefit plan income, net 54 31 39
Settlement charges (84) (58) (88)
Interest expense (284) (205) (261)
Financing costs (5) 0 0
Losses on early retirement of debt 0 (30) (33)
Interest income 4 20 25
Income (loss) before income taxes (4,79 0) 728 1,420
Federal, state and local income tax benefit (expense) 846 (164) (322)
Net income (loss) (3,94 4) 564 1,098
Net loss attributable to noncontrolling interest 0 0 10
Net income (loss) attri butable to Macy's, Inc. shareholders $ (3,944) $ 564 $ 1,108
Basic earnings (loss) per share attributable to Macy's, Inc. shareholders $ (12.68) $ 1.82 $ 3.60
Diluted earnings (loss) per share attributable to Macy's, Inc. shareholders $ (12.68) $ 1.81 $ 3.56
Consolidated Statements of Operations - USD ($) $ in Millions
12 Months Ended
24
Running Head: Macy’s Inc.
Balance Sheet
Consolidated Balance Sheets - USD ($) $ in Millions Jan. 30, 2021 Feb. 01, 2020
Current Assets:
Cash and cash equivalents $ 1,679 $ 685
Receivables 276 409
Merchandise inventories 3,774 5,188
Prepaid expenses and other current assets 455 528
Total Current Assets 6,184 6,810
Property and Equipment – net 5,940 6,633
Right of Use Assets 2,878 2,668
Goodwill 828 3,908
Other Intangible Assets – net 437 439
Other Assets 1,439 714
Total Assets 17,706 21,172
Current Liabilities:
Short-term debt 452 539
Merchandise accounts payable 1,978 1,682
Accounts payable and accrued liabilities 2,927 3,448
Income taxes 0 81
Total Current Liabilities 5,357 5,750
Long-Term Debt 4,407 3,621
Long-Term Lease Liabilities 3,185 2,918
Deferred Income Taxes 908 1,169
Other Liabilities 1,296 1,337
Shareholders’ Equity:
Common stock (310.5 and 309.0 shares outstanding) 3 3
Additional paid-in capital 571 621
Accumulated equity 3,928 7,989
Treasury stock (1,161) (1,241)
Accumulated other comprehensive loss (788) (995)
Total Shareholders' Equity 2,553 6,377
Total Liabilities and Shareholders’ Equity $ 17,706 $ 21,172
25
Running Head: Macy’s Inc.
Statement of Cash Flows
Ratio analysis Macy’s Inc
Feb. 02, 2019USD ($)
$ 1,098
136
88
962
30
63
(389)
112
(15)
(61)
(87)
21
55
14
(136)
(156)
1,735
(657)
(275)
Disposition of property and equipment 113 185 474
Other, net 28 (30) 2
Net cash used by investing activities (325) (1,002) (456)
Cash flows from financing activities:
Debt issued 2,780 0 0
Debt issuance costs (95) (3) 0
Debt repaid (2,049) (597) (1,149)
Dividends paid (117 ) (466) (463)
Increase (decrease) in outstanding checks 181 (62) 16
Acquisition of treasury stock (1) (1) 0
Issuance of common stock 0 6 45
Proceeds from noncontrolling interest 0 0 7
Net cash provided (used) by financing activities 699 (1,123) (1,544)
Net increase (decrease) in cash, cash equivalents and restricted cash 1,023 (517) (265)
Cash, cash equivalents and restricted cash beginning of period 731 1,248 1,513
Cash, cash equivalents and restricted cash end of period 1,754 731 1,248
Supplemental cash flow information:
Interest paid 257 242 328
Interest received 5 20 25
Income taxes paid (net of refunds received) 98 229 345
Restricted cash, end of period $ 75 $ 46 $ 86
Projected Ratios
1/30/21 2/1/20 2/2/19
Current Ratio 9.38 15.73 #DIV/0!
Quick Ratio 8.61 14.72 #DIV/0!
Debt-to-Total-Assets Ratio 0.23 0.13 #DIV/0!
Debt-to-Equity Ratio 0.30 0.14 #DIV/0!
Times-Interest-Earned Ratio -120 -189 -147
Inventory Turnover 4.5961844 4.7340015 #DIV/0!
Fixed Assets Turnover 2.92 3.70 #DIV/0!
Total Assets Turnover 0.32 0.27 #DIV/0!
Accounts Receivable Turnover 63 60 #DIV/0!
Average Collection Period 5.81 6.08 0.00
Gross Profit Margin % 171% 162% 1.6093068
Operating Profit Margin % 197% 158% 154%
ROA % 78% 42% #DIV/0!
ROE % 101% 48% #DIV/0!
26
Running Head: Macy’s Inc.
Nordstrom Ratio analysis
27
Running Head: Macy’s Inc.
Projected Ratios
12/31/15 12/31/17 12/31/18
Current Ratio -0.29 -2.30 #DIV/0!
Quick Ratio -0.91 -2.99 #DIV/0!
Debt-to-Total-Assets Ratio 1.49 47.21 #DIV/0!
Debt-to-Equity Ratio -3.05 -1.02 #DIV/0!
Times-Interest-Earned Ratio 23 47 47
Inventory Turnover 5.7514761 8.0854167 #DIV/0!
Fixed Assets Turnover 2.87 3.71 #DIV/0!
Total Assets Turnover 2.14 100.15 #DIV/0!
Accounts Receivable Turnover 44 87 #DIV/0!
Average Collection Period 8.35 4.21 0.00
Gross Profit Margin % 3% 3% 0.0239596
Operating Profit Margin % -39% -31% -31%
ROA % -55% -3476% #DIV/0!
ROE % 112% 75% #DIV/0!
Pro-Forma Income Statement
Projected Income Statement 1/30/22 1/30/23 1/30/24
Revenues $35,210 $47,886 $63,688
Cost of Goods Sold 22,887 31,605 40,760
Gross Profit 12,324 16,281 22,928
Operating Expenses 352 479 637
EBIT 11,971 15,802 22,291
Interest Expense (418) (639) (869)
EBT 12,389 16,441 23,160
Tax 991 1,315 1,853
Non-Recurring Events 0 0 0
Net Income 11,398 15,126 21,307
28
Running Head: Macy’s Inc.
Pro-Forma Balance Statement
Projected Balance Sheet 1/30/22 1/30/23 1/30/24
Assets
Cash and Equivalents ($2,997) $5,608 $13,699
Accounts Receivable 809 1,172 1,694
Inventory 10,451 15,629 21,028
Other Current Assets 7,430 8,080 15,706
Total Current Assets 15,693 30,489 52,127
Property Plant & Equipment 13,270 19,942 26,959
Goodwill 7,816 11,713 15,610
Intangibles 917 1,405 1,903
Other Long-Term Assets 1,440 2,320 3,133
Total Assets 39,136 65,869 99,732
Liabilities
Accounts Payable 6,025 9,296 12,859
29
Running Head: Macy’s Inc.
Other Current Liabilities 3,793 5,383 6,806
Total Current Liabilities 9,818 14,679 19,665
Long-Term Debt 8,329 14,190 20,752
Other Long-Term Liabilities 4,498 6,160 8,037
Total Liabilities 22,645 35,029 48,454
Equity
Common Stock 6 9 12
Retained Earnings 19,387 34,513 55,820
Treasury Stock (2,559) (4,015) (5,504)
Paid in Capital & Other (343) 333 950
Total Equity 16,491 30,840 51,278
Total Liabilities and Equity 39,136 65,869 99,732
Pro-Forma Projected Ratios
Projected Ra琀椀os
1/30/22 1/30/23 1/30/24
Current Ra琀椀o1.60 2.08 2.65
Quick Ra琀椀o0.53 1.01 1.58
Debt-to-Total-Assets Ra琀椀o0.58 0.53 0.49
Debt-to-Equity Ra琀椀o1.37 1.14 0.94
Times-Interest-Earned Ra琀椀o-29 -25 -26
Inventory Turnover 3.3690642 3.0639019 3.0287241
Fixed Assets Turnover 2.65 2.40 2.36
Total Assets Turnover 0.90 0.73 0.64
Accounts Receivable Turnover 44 41 38
Average Collec琀椀on Period 8.39 8.93 9.71
Gross Pro昀椀t Margin % 35% 34% 0.36
Opera琀椀ng Pro昀椀t Margin % 34% 33% 35%
ROA % 29% 23% 21%
ROE % 69% 49% 42%
30
Running Head: Macy’s Inc.
Years Cash Flow Net Cash Flow Cumulative Discounted
0 (10014544) -10014544
1 3464255 -6550289 3464255 3268165
2 3966543 -2583746 7430798 3530209
3 3940016 1356270 11370814 3308113
4 3229562 4585832 14600376 2558116
TOTAL 14600376 12664603
Net Present Value
Cost Analysis
Common Stock Financing Debt Financing
Recession Normal Boom Recession Normal Boom
31
Running Head: Macy’s Inc.
EBIT $4,000 $6,000 $8,000 $4,000 $6,000 $8,000
Interest 0 0 0 0 0 0
EBT 4,000 6,000 8,000 4,000 6,000 8,000
Taxes 3,964,000
#######
#
######
# 3,964,000 5,946,000 7,928,000
EAT 3,960,000
#######
#
######
# 3,960,000 5,940,000 7,920,000
# Shares 1,070 1,070 1,070 311 311 311
EPS
($3,699.23
)
#######
#
######
#
($12,733.12
)
########
#
($25,466.24
)
