The US's #1 department store chain has adopted the name of its most famous brand and cash cow: Macy's. Macy's, Inc. operates about 840 stores in 45 states, the District of Columbia, Guam, and Puerto Rico under the Macy's and Bloomingdale's banners that ring up almost $28 billion in annual sales. The stores sell men's, women's, and children's apparel and accessories, cosmetics, and home furnishings, among other things. It also operates macys.com and bloomingdales.com. Macy's flagship store in Manhattan's Herald Square is the world's largest. The Macy's Thanksgiving Day Parade, started in 1924, is an annual rite. Macy's (formerly Federated Department Stores) began as a dry goods store more than 150 years ago.
Macy's rings up 100% of its sales in the US. (The Al Tayer Group operates a Bloomingdale's store in Dubai under license.) In 2009 Macy's adopted a new corporate structure with some 60 geographic districts grouped into seven regions.
Main chain Macy's and Bloomingdale's, its up-scale subsidiary, are American retail institutions with the company and its predecessors operating department stores since 1830. More recently, Bloomingdale's began opening outlet stores. With more than a dozen in operation at the end of fiscal 2014 (ended January), Bloomingdale's Outlets are a focus for growth at the company. Both chains have online incarnations (macys.com, bloomingdales.com).
Sales and Marketing
Macy's spends heavily across multiple media, including print, television, direct mail, and more, to drive traffic to its stores and websites. Advertising and promotional costs, net of cooperative advertising allowances, was $1.16 billion in fiscal 2014 (ended January), compared to $1.12 billion in fiscal 2013.
The road to success has been a bumpy one for Macy's since its purchase of May Department Stores. Sales began falling seven years ago, prior to the onset of the deep recession and retail slump in the US, which made matters worse. However, Macy's appears to have weathered the storm and emerged as a healthier company. In fiscal 2014 (ended January), sales increased 1% versus the prior year, to $27.9 billion. (Fiscal 2014 had one fewer week than 2013. On a comparable basis, net sales for 2014 increased 2% yer over year.) Net income rose 11% to nearly $1.5 billion over the same period. The department store chain credited its My Macy's localization, omnichannel, and Magic Selling strategies for its fourth consecutive year of rising sales and profits. Also, increased sales in the South, complemented by strong sales of its private label brands (20% of net sales). Cash flow from operations has also risen steadily over the past three years, to $2.5 billion in fiscal 2014.
While Macy's has added about $4.5 billion in sales since fiscal 2010, the $27.9 billion it rang up in 2014 is still below the nearly $30 billion it took in in fiscal 2007.
Under the leadership of its charismatic chairman and CEO Terry Lundgren, Macy's has fought hard to reinvent the American department store by making it more relevant to younger consumers and local markets. Key to Macy's improved performance is its My Macy's localization initiative, around which the nationwide retailer reorganized in 2008-2009. The initiative focuses on tailoring the shopping experience and about 10% to 15% of the store's merchandise assortment to the local market. So customers in Austin, for example, will find plenty of burnt orange apparel (the signature color of the University of Texas) and Austin-related merchandise, while shoppers in Columbus will find Ohio State licensed merchandise and plenty of golf attire, which is popular there. My Macy's combined with the retailer's omnichannel strategy, which integrates the in-store, online, and mobile retail experiences, and its MAGIC Selling customer engagement program have worked to drive sales across the chain. Macy's is also looking to Millennials, those between the ages of 13 and 30, for growth. By re-focusing merchandise assortments and marketing efforts to make them more exciting and relevant to those who grew up with fast fashion (H&M, Forever 21), Macy's hopes to win them over. The company has also increased its offering of exclusive merchandise, signing exclusive deals with Martha Stewart and Tommy Hilfiger.
To avoid lost sales due to out of stock merchandise, Macy's is increasing the number of stores that can fulfill orders from others stores and/or from the Internet and mobile devices. As of early 2014, 500 Macy's stores has this capacity versus about 290 at the beginning of 2013. In fiscal 2015, nearly all Macy's stores are expected to be fulfilling order from other stores and/or online. Also this year, nearly all stores are expected to be fulfilling order for pick-up related to online purchases. The company has also invested $35 million to expand its online order fulfillment center in Goodyear, Arizona to accommodate increased online traffic.
At home, the world's largest department store is about to get even larger. Macy's has announced plans to spend about $400 million by fall 2015 to expand and overhaul its flagship location. The store, which occupies a square city block, will expand by converting space currently used for stock and offices to add 100,000 sq. ft. of selling space. Beyond New York, a new Macy's store in Puerto Rico's largest shopping mall is slated to open in fall 2015. Also, Bloomingdale's plans to enter the Hawaii market in in fall 2015 with a store in Honolulu.