America's largest fashion retailer and department store, Macy's, Inc. operates about 900 stores in 45 states, Guam, Puerto Rico, and Washington, DC under the names of Macy’s, Bluemercury's, and Bloomingdales banners (and accompanying e-commerce sites), that together ring up some $27 billion in annual sales. The company's stores sell men's, women's, and children's apparel and accessories, cosmetics, and home furnishings, among other things. Macy's historic flagship store in Manhattan's Herald Square has held the title of world's largest department store since 1924. The Macy's Thanksgiving Day Parade, started in 1924, is an annual rite.
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. Bloomingdale's Outlets are a focus for growth at the company. Both chains have online incarnations (macys.com, bloomingdales.com).
Macy's flagship stores including Herald Square in New York City, Union Square in San Francisco, State Street in Chicago, and Dadeland in Miami and South Coast Plaza in southern California.
Women’s Accessories, Intimate Apparel, Shoes and Cosmetics accounts for around 38% of Group revenue, followed by Women’s Apparel at 23%; Men’s and Children’s also at 23%; and Home/Miscellaneous at 16%.
Macy's also operates a bank subsidiary, FDS Bank, which provides credit processing, certain collections, customer service and credit marketing services.
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 expense was $1,173 million for FY2015, essentially unchanged on FY2014.
In fiscal 2015, revenue fell 4%, or around $1.1 billion, on prior year to $27.1 billion. Weaker comparable sales in watches, cold weather items, and housewares and tabletop were the main culprits. Lower tourist spending in New York City, Las Vegas, San Francisco, and Chicago also impacted the top line. The company also experienced a bad Christmas period, with November and December sales down 4.7%; the company blames unseasonably mild weather for impacting sales of coats, sweaters and gloves.
Net income at Macy's tends to track revenue, and consequently in FY2015 it fell 30% to $1 billion. Cash from operations was down 27% to $2 billion due to an increase in accounts payable and accrued liabilities.
Macy's is suffering from a triple-header of sluggish mall traffic, increasing competition from other department stores and discount retailers, and the negative impact of the strong US Dollar on tourists. After a poor 2015 Christmas period, the company announced it would be re-examining its real estate footprint and shutting down underperforming stores, to the cost of 4,000 sales associate and back-end jobs, in attempt to solidify its base.
The company is battling discounters by experimenting with an off-price store format, Macy's Backstage, and it opened six pilot stores in 2015 in the New York metropolitan area. Averaging around 30,000 sq. ft., Macy's Backstage stock women's, men's and children's apparel, shoes, fashion accessories, housewares, home textiles, intimate apparel and jewelry.
The company is also investing in its omnichannel strategy for Macy's and Bloomingdales's, and began selling in China in Q4 2015 via a joint venture with Fung Retailing (Macy's has a 65% stake). It operates an online store on Alibaba.
Macy's announced closure of 175 North American stores in 2015. During 2016 the company plans to execute a series of cost-efficiency and process improvement measures aimed at reducing its expenses by approximately $400 million. At the same time Macy's plans to invest in growth strategies, particularly in omnichannel capabilities at Macy’s and Bloomingdale’s.
Mergers and Acquisitions
In fiscal 2015 Macy’s acquired luxury beauty products and spa services retailer Bluemercury, Inc. for about $210 million. Bluemercury was the company's first acquisition in 10 years. At the point of completion, Bluemercury has 62 stores in 18 states, typically in prime street-level locations and urban lifestyle centers, as well as an online business. Macy's aims to expand Bluemercury's store count to 115 by the end of 2017.