Macy Incorporation Harvard Case Solution & Analysis


Rowland Hussey Macy started his departmental store business with a single dry goods store in New York City during 1858; although it was not successful but it followed the launch of R.H. Macy & Co; which proved to be a successful investment. He selected red star symbol for his store as symbol of success. Macy’s success story began since then and it was famous for innovation and it introduced changes in retail store industry by employing women on an executive post. Moreover, Macy introduced diverse business practices in retail industry by implementing price concept of charging same prices to all of its customers and advertisement of retail goods through new papers. He introduced many innovative retail products such as colorful bath towels, tea bags and Idaho baked potato. Macy secured the first liquor license in retail industry of New York City that further enhanced its profitability.

In 1924, Macy expanded its store space to more than 1 million square feet, which made it the World’s largest store, meanwhile, after the stock listing of Macy’s retail stores it decided to expand through acquisition and during the period from 1922 to 1936; he acquired the Toledo-based department store namely Lasalle & Koch, Davison-Paxton in Atlanta and Newark-based Bamberger’s.

Macy has been celebrating annual traditional event since 1924 in order to honor immigrant employees that is known as Macy’s Thanksgiving Day Parade. After a successful expansion and growth period, H. R. Macy and Company was acquired by Federal Department Stores Inc. by the end of 1994 and during 1996 Federal Department Stores were converted to Macy’s Inc. and its stock was traded on New York Stock Exchange under the code “M”. Moreover, in 2011,  in coordination of The Gap and Williams Sonoma, Macy’s and Bloomingdale’s launched their international shipping services and this was the first step towards international growth, which opened up the whole world of retail market for Macy’s Inc. goods.

Currently, Macy’s Inc. operates 840 stores in 45 states and its brands include Macy’s and Bloomingdale’s. Moreover, the Bloomingdale’s has operations in Dubai under the name of Al Tayer Group LLC. Macy’s Inc. has diverse work force consist of 172,500 employees.

Historical Performance and Price

Historical Performance

Analysis of 5 years’ historical performance (Jan. 2010 to Jan. 2014) reveals that Macy Inc. has been very successful in retail stores industry overall and it has increased it’s sales revenues by 19% over the 5 year period. Further, analysis of year by year growth reveals that Macy’s growth rate is declining year by year as its growth rate was 6.4% during the period 2010-11 but it has decreased to 0.9% during the period 2013-14. On the other hand, cost of goods sold has been increasing along with greater growth rate; which is 20% in comparison with its sales growth over the 5 year period. Moreover, the growth in cost sales is falling year by year that has been a result of decreasing sales revenues. However, the gross profit margins have been very constant over the same period around 40% with slight decline in gross profit margins of 1%. Additionally, the general and administration expenses has been well under control and they are also declining with greater percentage in comparison to decline in sales revenue growth, however, general and administrative expenses has grown by 5% over the 5 years’ period.

Meanwhile, the operating profits margins have been very surprising and during the five years period operating profit margins have grown by 27% which quite higher growth rate in comparison to negative growth rate in gross profit margins. The higher growth rate shows that Macy has managed to control operating expenses which has contributed to the higher operating profit margins. Moreover, profits before tax has grown by 352% over the five year period but year on year growth rate has been declining, however, the 352% of growth rate is mainly because of the fall in interest expenses which has decline by 31% over the five year period. Moreover, net margins have been increasing constantly year by year and during the five year period net margin has been increased by 57%. On the other hand, earnings per share has been constantly increasing, however, the growth in earnings per share is partly because of the growth in net earnings and partly because of the repurchase of its equity shares (Exhibit 1).

Historical Stock Price

Analysis of historical share price reveals that share price has been increasing year by year over the five years’ period (Jan. 2009 to Jan. 2014). Moreover, growth in share price has been very attractive in comparison to the growth in S&P 500 stock prices; however, the higher growth in share price reveals that despite of the declining revenue growth still Macy’s Inc. has growth potentials and future opportunities to expand their business. Share price of Macy Inc.  as at January 31st 2014 was $53.20 per share with 378.3 .....................................

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