Macy’s, inc.—2018 david, f. r., david, f. r., & david, m. e. (

1. Macy’s, Inc.—2018
David, F. R., David, F. R., & David, M. E. (2019). Strategic
Management (17th Edition). Pearson Education (US).
https://online.vitalsource.com/books/9780135203736
www.macys.com, M
As of March 2018, Macy’s, Inc. operates 690 department stores
in 45 states, Washington DC, and outside the United States in
Columbia, Guam, Puerto Rico, China, United Arab Emirates,
and Kuwait with third party license agreements. Headquartered
in Cincinnati, Ohio, the company’s brands include Macy’s,
Bloomingdale’s, Backstage, The Outlet, Last Act, and
Bluemercury. Most stores are located in urban or suburban areas
and include a mix of apparel, accessories, cosmetics, home
furnishings, and various other consumer goods. Macy’s reported
revenues in excess of $25 billion in year ending January 2017
deriving from 382 company-owned stores,with the rest being
leased.
Approximately 710 stores are department stores operating under
the names Macy’s and Bloomingdale’s, and the remainder are
specialty stores that include Bloomindale’s The Outlet,
Bluemercury, Macy’s Backstage, and Last Act. Macy’s divested
66 stores in year ending January 2017 and 43 year end January
2016, with plans to continue reducing total store numbers by
about 30 as leases expire.
Macy’s employs 148,300 full-time and part-time employees
with 10 percent represented by unions. Closing more and more
stores every year, Macy’s is struggling financially and needs a
clear strategic plan. During the month of December 2017,
Macy’s spent $32 million on television advertising, compared to
J.C. Penney, who spent $27 million that month.History
Macy’s was founded by Rowland Hussey Macy 150 years ago.
He chose the red star logo based on a tattoo on his forearm
which was inspired by the North Star Polaris that often guided

2. him as a sailor. After several failed attempts in retail, R. H.
Macy started Macy’s in 1858 as a dry goods store in New York
City with first-day sales grossing $11.06, but first-full-year
sales of $85,000. Macy was a pioneer in many facets of
business, promoting the first woman to an executive position in
retail and the first to charge all customers the same price for an
item. That original Macy’s store at 1.1 million square feet has
been at the same location since 1902 and has been the same size
since 1924.
Macy’s went public in 1922 and began expanding across the
United States shortly after. The firm is famously known for its
Thanksgiving Day Parade, which began as a Christmas Parade
in 1920 by immigrant workers thankful for their new Ameri can
nationality. In 1929, Macy’s was acquired by Federated
Department Stores and remained in operation under that name
until 2007 when Federated changed its corporate name to
Macy’s, Inc. The company’s revenues and profits have declined
every year since 2015.Vision/Mission
Macy’s provides a quite lengthy vision statement on their
website, but no mission statement. At the corporate website,
simply click on About Us then click on Corporate Vision.
Unhappy with the vision and lack of mission, someone once
proposed a mission statement for Macy’s as follows:
At Macy’s, we aspire to provide our worldwide shoppers an
experience that gives them the confidence to be the best version
of themselves. Whether utilizing the unsurpassed expertise of
our employees in store, or shopping on-line, we want to provide
our customers with open and honest communication while they
shop for clothing and accessories that makes them life-long
members of our family.Internal IssuesOrganizational Structure
Exhibit 1 provides Macy’s organizational structure. Currently, 7
of the top 19 executives are female. Mr. Macy would likely take
great pride in this; he hired the first women executives in U.S.
retail history in the 1920s.
Exhibit 1 Macy’s Top Executives and Organizational Chart

3. . Sustainability
Macy’s is committed to sustainability and has detailed
commentary on its website on various sustainable measures it
has taken such as the firm adding 1.8 million LED lights
through its properties, saving 26 million kilowatt-hours of
power. Macy’s was ranked in 2016 as the fourth largest
American enterprise for installed solar capacity; the company
sells most of the solar power it generates to others. Macy’s has
been a member of the Dow Jones Sustainability Index since
2005.Current Strategies
Macy’s fiscal 2017 revenues and profits were down 4.8 and 42.9
percent, respectively, and the company closed about 7 percent
of its stores. The corporation blames shifts in consumer
shopping habits and has designed several new strategies moving
forward, but most center around what Macy’s, Inc. refers to as
the North Star Strategy, with the name being an
acknowledgement to their founder. There are five key points to
the North Star Strategy, and while all are vague as reported on
the Annual Report, they are worth mentioning (paraphrased): 1)
Increased marketing research to improve Macy’s loyalty
programs and pricing strategies, 2) Increased focus on private
label brands only found at Macy’s stores as well as catering
increasingly to Macy’s Backstage and Last Act customers, 3)
Further developing of the mobile app and focus on better
trained sales associates in what Macy refers to as Omnichannel,
simply meaning customers can shop in more ways than
traditional stores, 4) Increased focus on cost reduction,
reinvestment, and extra care in the real estate decisions, 5)
Exploring unmet customer needs and exploring acquisitions
through increased marketing research.
Macy’s is adding Macy’s Backstage stores in existing Macy’s
stores. The firm’s Last Act program is aimed to move clearance
merchandise at Macy’s stores more effectively. The company is
using a retrenchment strategy by recently closing 100 Macy’s
stores, with plans to close another 30 stores by year end 2018.
Macy’s, Inc. is adding Bloomingdale’s and Bluemercury stores

4. as well as adding Bluemercury boutiques inside existing Macy’s
stores. The company currently has about 20 Bluemercury
locations inside Macy’s stores.
Macy’s has a partnership with Brookfield Asset Management to
help determine effective ways of increasing value in Macy’s,
Inc.’s real estate investments. Through January 2019,
Brookfield is formulating strategies for each of Macy’s Inc.’s
real estate assets.
Macy’s continues to expand its Macy’s Backstage stores, which
are around 30,000 square feet each and offer discounted
products, after first opening six such stores in New York in
2015. Current focus is on adding Backstage stores inside
existing Macy’s stores as a means of attracting cost conscious
customers into Macy’s stores. The company desires to expand
further into China and currently has a joint venture with Fung
Retailing Limited holding a 35 percent stake and Macy’s
holding the remaining 65 percent ownership stake in Macy’s
China Limited. All business to date is through ecommerce on
Alibaba Group’s Tmall Global website.Suppliers
Macy’s purchases its products from many different suppliers
with no single supplier accounting for more than 5 percent of
the firm’s net purchases and no formal long-term commitments
with any of the suppliers. Macy’s considers its relationships
with suppliers to be good. The majority of Macy’s products are
produced outside the United States, primarily from Asia.Private
Label Brands
Macy’s has numerous private labels brands that include
American Rag, Aqua, Charter Club, Epic Threads, first
impressions, Greg Norman for Tasso Elba, Hudson Park, John
Ashford, Martha Steward Collection, Morgan Taylor, and many
more. Several of the private label brands are licensed to
Macy’s, Inc. through third party trademarks that extend decades
into the future.Finance
Macy’s continues to struggle financially as indicated by
declining revenues in Exhibit 2, and all the red downward
pointing arrows in the balance sheets provided in Exhibit 3.

5. Even as its finances worsened, the firm repurchased nearl y 8
million shares of stock in 2016 and increased its dividend to
$1.51 per share, possibly as a measure to keep shareholders
from selling the stock. This marked the sixth dividend increase
in the last 5 years. From 2015 to the end of 2017, Macy’s stock
dropped 75 percent in value from over $70 to $18 per share, yet
dividend payouts in 2017 resulted in a reduction of retained
earnings; the firm paid out approximately $850 million in
dividends to only $611 million in net income in
2017.Exhibit 2 Macy’s, Inc.’s Income Statements (in millions)
Exhibit 3 Macy’s, Inc.’s Balance Sheets (in millions)
Segment Data
Exhibit 4 reveals that Macy’s is fairly well positioned across
the United States, but in reality the firm is primarily focused on
the east and west coasts. Like many department stores and
retailers, women account for the bulk of the business and
Macy’s, Inc. is no exception with over 60 percent of revenues
derived from products exclusively for women. Department
stores generally do not cater to men much.Exhibit 4 The
Number of Macy’s Inc. Stores Across the United States
Exhibit 5 gives the number of Macy’s, Inc. stores by brand.
Note the steady decline in the flagship Macy’s department
stores. Exhibit 6 gives a percentage breakdown of Macy’s, Inc.
sales by product category; note that women products comprise
61 percent of total sales.
As of January 2018, Macy’s, Inc. had 852 stores with nearly 400
owned and the others, leased. Among the 852 stores, 258 were
located in the Northeast USA, while 188 were located in the
South, 144 in the North Central, and 131 in both the Northwest

6. and Southwest. Exhibit 5 reveals that the majority of stores are
of Macy’s brand with Bluemercury store numbers accounting
for the second most, followed by Bloomingdale’s. Bluemercury
stores are significantly smaller than Bloomindales in square
feet. The firm does not report revenues nor profits across
segments, but it can be inferred from company actions that
Bluemercury is more efficient at least in generating profits as
the firm is expanding this segment while closing
underperforming Macy’s branded stores. Bluemercury is an
upscale spa focusing on offering spa services as well as
haircuts, makeup, and other beauty products. Ulta Beauty is a
much larger competitor with a similar profile and target
customer as Bluemercury. Macy’s, Inc. hopes customers
utilizing Bluemercury will shop in Macy’s department stores as
they make their way for spa services at Bluemercury.
Competitors
Competition in the department store business is extremely
competitive with many options for customers ranging from
online to traditional stores. Stores specialize in home goods,
apparel, general merchandise, and many other areas from
discount stores to higher end stores. Even stores like Walmart
and Target have entire sections devoted to department store
offerings including clothing, home goods, jewelry, and more.
Customers have never had as many choices as before. The entire
department store industry is valued at over $150 billion with
profits in excess of $4 billion. However annual growth has
declined around 5 percent a year for the last several years and is
expected to continue to decline around 3 percent annually
through 2023. Such numbers for example would place
department stores in the bottom half of a BCG Matrix either as
cash cows or dogs depending on their relative position to the
top revenue-generating firm in the industry.
Online department stores offering similar products simply do
not incur the overhead cost of traditional stores like Macy’s that
incur really high rent, tax, utilities, and labor expenses in areas

7. such as New York City. Moving forward in the industry, it is
vital for stores such as Macy’s to differentiate themselves from
rivals and online options—probably by providing superior in-
store service. To date, Macy’s strategy (at least publicly stated
on the Annual Report) is providing omnichannel offerings and
superior service. This type of vague strategy will likely not be
good enough to compete with online providers offering similar
quality products to Macy’s, Inc.
Being forced to enter pricing wars with online providers is a
huge threat facing all brick and mortar providers, and one they
are likely unable to win. Simply offering online products
themselves is a viable strategy although it is likely unwise to
undercut in-store prices; customers can simply shop in the store
and then order online. This phenomenon is called show
rooming. All specialty stores that sell similar products as
department stores, such as shoe stores and athletic appar el
stores, can be considered rivals to Macy’s, Inc. A financial
comparison with two rival companies is provided in Exhibit 7.
J. C. Penney Company (JCP)
Headquartered in Plano, Texas, JCP operates 1,013 retail
locations in the United States and Puerto Rico and had revenues
of $4.5 billion in year ending January 2017. The firm has
struggled in recent years switching its strategy and product
offerings back and forth at times, often confusing the customer.
Around 2012, JCP hired a new CEO and removed the coupons
customers expected using “One Fair Price” strategy and
removed commissions for sales people. Three CEOs later, these
programs are back in effect and operating income is positive
after 3 years of negative numbers. JCP continues to cut its

8. workforce though, particularly at the corporate level. About 45
percent of JCP brands are private label brands that provide
higher margins than national brands the store sells, such as
Levis.
JCP has 106,000 full-time employees and operates 875 stores as
of November 2017. Founded in 1902, JCP is not doing well
today. At the close of 2017, JCP’s Better Business Bureau
(BBB) rating was 1.08 out of 5 stars based on 47 customer
reviews and a BBB Rating of F. The company’s
ConsumerAffairs.com rating is 1 out of 5 stars based on 259
reviews submitted in the past year. Most of the low ratings are
attributed to poor customer service.
Nordstrom, Inc. (JWN)
Headquartered in Seattle, Washington, Nordstrom was founded
in 1901 as a shoe store in Seattle. Nordstrom caters to upper and
middle class consumers who enjoy purchasing luxury items.
Nordstrom typically focuses on goods that are one level below a
true luxury good of say, Louis Vuitton, offering customers
excellent quality and notoriety with a better price. Nordstrom’s
inventory includes clothing, accessories, handbags, jewelry,
cosmetics, and fragrances as well as wedding and home
furnishings departments. Nordstrom operates in the US, Puerto
Rico, and Canada.
The firm operates over 120 department stores and 226 off-price
with Nordstrom Rack stores employing 78,000. The firm is
currently testing smaller stores with an increased focus on
luxury goods that focus on customers who are less price
conscious as a means of differentiating itself in the market, or
at least as a means of focusing on a more profitable customer
segment. The first Nordstrom Rack store in Canada opened in
2018 in Toronto.
Target Corporation (TGT)

9. Headquartered in Minneapolis, Minnesota, Target is the second-
largest general merchandise retailer in the United States, behind
Walmart. Target is similar to Walmart, but with higher quality
products, according to its patrons. Target operates over 1,834
stores across the United States and employs over 320,000; the
firm reported revenues in year ending January 2017 of $69.5
billion.
Target recently launched a series of national, local and
charitable initiatives that mark the retailer’s largest-ever push
into team sports. Target is an official partner of Major League
Soccer (MLS) and has a multi-year deal that includes airtime
during MLS broadcasts on Univision, FOX Sports and ESPN,
opportunities for in-stadium experiences, player appearances,
and ownership of certain major MLS platform. Target also has a
$14 million commitment to local youth soccer through two new
national initiatives—an $8 million local soccer grant program,
and a $6 million partnership with the U.S. Soccer Foundation to
build 100 new soccer play spaces by 2020.
Online
Consumers are increasingly shopping online for clothing
through auctions and online-only stores. Traditional retailers
such as Nordstrom have virtually all responded with their own
online websites, yet often at the same high prices found in their
stores. Brick-and-mortar stores still hold the distinct advantage
of customers being able to hold, feel, and try on items before
purchasing, as well as talk to knowledgeable salespeople at
higher quality stores.
According to some analysts, the 15 most popular “online only”
clothing stores that compete with Macy’s, Inc. by offering
clothing, mainly for women, are listed below:
1. Boohoo—a UK-based company; dresses start at $6; free
shipping on orders over 60

10. 2. Cotton On—an Australian retailer; dresses start at $10; free
shipping on orders of over $55+
3. One Loved Babe—an online boutique for women; dresses
start at $20; free shipping
4. Yes Style—a Hong Kong-based store; dresses start at $3.95,
free shipping on orders over $35
5. Amazon.com—Prime members get free shipping and returns
6. Missguided—a UK-based firm; dresses start at $6; shipping
free is $5 on all orders
7. ASOS—very fast and reliable; dresses start at $12.50; free
shipping on orders over $40
8. Adore Me—specializes in lingerie in straight and plus sizes;
free shipping
9. Saved by the Dress—Miami-based; dresses start at $25; free
shipping on orders over $60
10. Dog Dog—dresses start at $17.95; free shipping on all
orders
11. Lulu’s—dresses start at $14; free shipping on orders over
$50
12. Dress Up—boutiques; dresses start at $16; free shipping on
orders over $50
13. Thred Up—a resale store carrying all brands like new; free
shipping on orders over $79

11. 14. Blame Betty—offers vintage or retro clothing; dresses start
at $27.60; shipping costs vary
15. 6pm—carries many brands such as Columbia, Under
Armour, Prana; for men and women
External Issues
Economic Conditions
Department stores are heavily dependent on the state of the
economy and customers’ disposable income. The economic
outlook for the United States is excellent through 2020.
Customers are increasingly purchasing online and this means of
purchasing is expected to exceed 10 percent annually through
2023. Despite lower profit margins, department stores are
expected to increase marketing efforts to attract customers into
the stores.
Many customers of Macy’s are increasingly shopping online for
the price range of products Macy’s provides. Department stores
have unknowingly “trained customers to wait for sales or look
for deals as consumers are increasingly price conscious.” Firms
are offering deals in low-traffic times and even offering
unannounced deals on select items.
Expenses
Although not likely to lead to a competitive advantage,
controlling costs remains a significant concern for department
stores moving forward simply to avoid going bankrupt.

12. Purchases account for over 50 percent of industry revenue alone
and Macy’s cost of goods sold is about 60 percent. Firms should
explore joint ventures or strategic alliances with providers to
help reduce costs, if at all possible. Backward integration is an
option as well, but most department stores simply offer too
many different products to make this a viable strategy. Labor
continues to be a relatively high expense totaling around 14
percent of revenues, but most workers are hourly and not paid
significantly. On January 1, 2018, however, 18 states increased
their minimum wages rates, even though the federal minimum
wage rate remains unchanged.
Firms must decide moving forward if they wish to increase their
labor to provide customers increased customer service wi th
experienced knowledgeable sales people in each section of the
store. Rent and utilities maybe surprisingly account for around
8 percent of revenues, but the price is still significant when
attempting to compete with online providers who have
considerably lower bills in this category. Marketing, contrary to
what many believe is a relatively low expense, accounts for
only 1 percent of revenues. However, this number may increase
as firms look to increase their marketing efforts to help attract
customers to the store.
Future
Like many department stores, Macy’s is struggling to compete
with online shopping and more niche retail stores that focus
tremendously on customer service or a small subset of high-end
customers. Because of this, Macy’s is moving their popular
Bluemercury stores inside Macy’s department stores to attract
new customers, the company’s promotions and other tactics
hope to draw new customers into the stores.

13. As Macy’s sales have declined in recent years, management has
shifted attention to monetizing some of the company’s highly
valuable real estate, knowing that real estate sales often lead to
significant one-time gains on an income statement. Macy’s may
be the biggest beneficiary in the retail sector from the new,
lower U.S. corporate tax law because with the sale of high-
dollar properties, Macy’s can pay down debt, continue paying
its really high dividend (currently one of the highest dividend
yields as of mid-2018) and possibly in late 2018 or 2019 start
buying back stock again. In 2016–2017, the company was
focused on paying down debt rather than trying to buy back
stock. Macy’s has actually started to sell excess real estate, and
some of the properties are in valuable locations.
Some Macy’s stores, while profitable, are not making enough
money to pay for the opportunity cost of what the real estate
would be worth if it were to be sold. For example, Macy’s has
numerous downtown stores in really hot real estate markets like
New York, San Francisco, and Chicago. Every time Macy’s
sells one of these “50-year-old” stores however, it has to pay a
pretty big tax bill because of that asset sale gain. But with
lower corporate taxes, there is more incentive to sell. To
manage this selling of real estate, Macy’s has formed a strategic
partnership with Brookfield Asset Management, a private equity
and real estate management firm that’s looking into several
dozen Macy’s store sites and ways to either redevelop the store
or do additional real estate development on, for example, the
parking lots or similar ideas of that nature.
Macy’s wants to monetize the upper floors of its humongous
stores, partly because the company’s real estate is worth more
than the entire company’s valuation right now. Being able to
sell off some of that real estate can bring in needed cash, pay
down debt, pay dividends to shareholders, and be transformative
for Macy’s viability.

14. Fiscal 2018–2019
In early 2019, Macy’s closed its Redmond Town Center main
store in Redmond, Washington, bringing the total to 83 of the
approximately 100 store closures announced in August 2016.
Over the last three fiscal years, Macy’s, Inc. has completed
transactions totaling approximately $1.3 billion in cash
proceeds. Heading into fiscal 2018, Macy’s, Inc. continues to
evaluate its real estate portfolio to identify opportunities where
the redevelopment value of its real estate exceeds that of non-
strategic operating locations. For example, in February 2018,
Macy’s signed an agreement to sell floors 8 through 14 of its
State Street store in Chicago to a private real estate fund
sponsored by Brookfield Asset Management. Brookfield intends
to convert these largely unused floors into dynamic, creative
office space. As part of this transaction, Macy’s, Inc. will
receive a total of $30 million ($27 million of consideration and
a $3 million contribution for certain improvements), as well as
upside participation in the ultimate value creation associated
with the conversion of the upper floors to office space. This
transaction will enable the company to make Macy’s on State
Street a more vibrant shopping destination. The company
anticipates closing this transaction in the first half of fiscal
2018.
Macy’s, Inc. expects to open two additional Bloomingdale’s
stores in San Jose, California, and Norwalk, Connectic ut, in
fiscal 2019. Both Macy’s off-price brand of stores, Macy’s
Backstage, and its clearance strategy, Last Act, are growing. As
of February 3, 2018, the company has a total of 52 Macy’s
Backstage locations (7 freestanding and 45 inside Macy’s
stores). Additionally, Macy’s Inc. is growing its luxury beauty
products and spa retailer, Bluemercury, by opening additional
freestanding Bluemercury stores and adding Bluemercury
products and boutiques to Macy’s stores. As of February 3,
2018, Macy’s, Inc. operated 157 Bluemercury locations (137

15. freestanding and 20 inside Macy’s stores).
Moving forward, Macy’s, Inc. needs a detailed strategic plan;
they must decide what position they wish to take in the
industry. Currently, offering moderately priced items in the
traditional department store format has not been effective
relative to discount department stores, specialty stores, or pure
online shopping.
Unit IV Project BPS
Instructions
Implementation Plan: Part 1
During Unit IV, VI, and VIII, you will be working on an
implementation plan for a business. The components within
these three units combined will create this plan.
Please take a look at the 30 case studies located in your
textbook on pages 357–614. There are multiple corporations
that provide a large array of services and products. Please select
one of these 30 organizations that interests you. You will use
this company for the assignments in Unit VI and Unit VIII.
For Part 1, describe the company that you selected, the
products/services they offer, and the history of the company.
Next, analyze the company’s strategy, mission, and
organizational structure. In your analysis, include the
information below.
· What does the strategy, mission, and organizational structure
say about the company?
· What are the positive aspects of the strategy, mission, and
organizational structure?
· What are the company’s short-term and long-term goals?
· What are ways to improve the strategy, mission, and
organizational structure?
You will need to reference your textbook and at least one
outside source for this assignment. You are encouraged to
utilize the CSU Online Library, but you may also use external

16. sources, as long as the source is reliable.
Your project must be a minimum of two full pages in length, not
counting the title and reference pages. Include an introduction
paragraph.
Resources
The following resource(s) may help you with this assignment.