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Quick Take Macy's



The first image that comes to mind when I think of Macy's is the Macy's Thanksgiving Day parade. The company has a wonderful brand, and over their 153 year history they have invested lots of capital in this brand. In 2011, their total advertising and promotional costs amounted to $1.1 billion. Competitor Kohl's does not show their advertising and promotional costs anywhere in their annual report. The capital Macy's is using to develop their brand appears to be unmatched by their competitors. The question is whether this capital, and the company's strong name, will benefit shareholders bailey button ugg boots with increased competition from online foes.



Macy's underwent a significant reorganization in 2008 and 2009. At the time, consumer spending was very low and the company was forced to lay off 7,000 of its 180,000 person workforce. This 4 percent cut in headcount was targeted towards management positions, where 40 percent of those jobs were eliminated. This reorganization was part of the "My Macy's" program. CEO Terry Lundgren told the Washington Post that as the company grew, the geographically divided regions became large and unwieldy. The "My Macy's" program aimed to centralize decision cheap bailey button ugg boots making over buying, merchandising, planning, and store operations. Regional stores were divided into groups of 10 or 11 so managers could visit each store every couple weeks. Macy's efforts to streamline the organization appear to have succeeded.



The chart on the next page shows Macy's stock price performance relative to the S 500 and the S 500 Retail Department Store Index. Price gains from 2009 to 2012 show favorable investor sentiments over the period. The company beat their same store sales growth goal for 2011. Their earnings grew over the last three years. Penny's recent quest to reinvent retail. Penny's struggles than Macy's success.



Marketwatch's Andria Cheng wrote an article today titled "Department Stores Could Go the Way of the DoDo." The article shows that as consumers use the internet for more and more purchases, department store will be at a disadvantage relative to specialty retailers that possess more flexibility. For example, think of the exclusively leather store at the mall. When someone wants a pair of leather boots they search online for "Boots like Jennifer Lopez" and they're given a choice between Macy's website and Everything Leather. Which site would you click on? I would lean towards the site that specializes in leather. Maybe that's just me. The advantage specialty stores have over department stores is that they can swiftly scale up and down to meet changing customer demand.



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Also, last year's "Cyber Monday" (the Monday after Thanksgiving) showed some changes in consumer buying habits. Shoppers are tending to spread their purchases over multiple online retailers, while cherry picking the best deals. Overall, online sales were up 17 percent from 2011, but people are seeking the most heavily discounted items, killing margins for retailers. This trend would level the pricing power between stores like Macy's and stores like Everything Leather, to use my example. Macy's wonderful brandname, and the trust it evokes in customers, was more important when a person was deciding whether to go to the store or not. Now a person is deciding between different online search results.



In conclusion, I believe the imagery of Macy's Thanksgiving Day Parade is becoming less valuable. Online customers have far more information than ever before and trusting the Macy's name only goes so far before pricing and specialization become more important. The management at Macy's is aware of shifting customer habits, and their attempts to streamline the organization appear to be working. Penny's has realized, the retail business is changing. It may take more than a good name to thrive over the long term.