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Macy’s: The Largest Department Store Sees Sluggish Top Line

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Overview

Macy’s (M) is a leading department store chain that operates about 823 stores in 45 states, the District of Columbia, Guam, and Puerto Rico. The department store operates under the Macy’s and the high-end Bloomingdale’s brands. The company also has a Bloomingdale’s store in Dubai, which is operated by Al Tayer Group. Macy’s stores sell apparel, cosmetics, accessories, shoes, and home furnishings.

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Sluggish sales growth

Macy’s net sales grew by 0.6% to $28.1 billion in fiscal 2014 ending January 31, 2015, compared to last year. The company registered a 0.9% sales growth in fiscal 2013, down from 4.9% in fiscal 2012. Macy’s and other department stores are struggling due to the strong emergence of online retailers, as well as stiff competition from off-price retailers and discount stores. Also, despite improving macro conditions, consumer spending on discretionary products is not up to the desired levels.

The company is implementing various strategies to improve its merchandise, grow its online business, and streamline the organization. You can read more about the company’s omni-channel approach and other aspects in our series on Macy’s business.

Competitive position

Macy’s is the largest department store based on retail sales. Macy’s competes with Kohl’s Corporation (KSS), J.C. Penney (JCP), and Dillard’s (DDS). The company also competes with upscale department stores like Nordstrom (JWN), and off-price retailers like TJX Companies (TJX) and Ross Stores (ROST).

Series overview

This series focuses on Macy’s performance in 4Q14 and fiscal 2014 with emphasis on the company’s revenues, same-store sales, profitability, inventory management, and valuation. Macy’s makes up 0.95% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY).

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