Financial Analysis of Macy’s Inc. and Nordstrom
Macy’s Inc. has established itself as a strong player in the retail industry, with over 850 Macy’s and Bloomingdale’s stores in 45 states. Macy’s competes against retail giants like Nordstrom, Kohl’s, JC penny and Saks Fifth Avenue for market share in the increasingly competitive department store industry. This financial report will choose Nordstrom as the major competitor, and serves as the comparison company. The annual report and 10-K filings were obtained from Yahoo! Finance. The financial statements for both companies used in this report are Consolidated Statement of Income, Consolidated Balance Sheets, and Consolidated Statement of Cash Flow from 2010 to 2012. All tables are included in appendix.
1. Company background & Overview
Macy's Department Stores, Inc. is a U.S. chain of mid-range department stores. In addition to its internationally renowned flagship Herald Square location in Midtown Manhattan, New York City, the company operates over 850 other stores in the United States as of September 12, 2012. Nordstrom, Inc. is an upscale fashion specialty retailer chain in the United States. Originally it is a shoe retailer, nowadays the company also sells clothing, accessories, handbags, jewelry, cosmetics, fragrances and home furnishings in some locations. There are now 231 stores operating in 31 states across the U.S. Beginning in 2008, department stores faced financial challenges partially attributed to the global economic crisis. The downturn negatively impacted department store liquidity, consumer spending and credit market conditions. Companies were able to cut operations and supply chain costs, and most have utilized the savings to improve their liquidity and the strength of their balance sheet. Also, developments in mobile phone technology are drawing more consumers away from brick-and-mortar stores toward online retail platforms. As a result, over the five years to 2012, the number of companies is expected to decrease at an annualized rate of 31.8% to an estimated 65 operators.
2. Financial analysis
2.1 Horizontal analysis
2.1.1 Horizontal analysis of Balance Sheet
In this section, we will look at the comparative statements of balance sheet of Macy’s Inc. for a three-year period. Macy’s fiscal year ends on the Saturday closest to January 31. Fiscal years 2011, 2010 and 2009 ended on January 28, 2012, January 29, 2011 and January 30, 2010, respectively. Fiscal 2009 is chosen as the base year for computing the percentage change in each account in 2010, and fiscal 2010 is the base year for computing the change in 2011. From table 1, two accounts stand out: 2010 cash and cash equivalent decreased by 13% over 2009, while in 2011 it increased by 93% over 2010. Short/Current Long Term Debt increased by 87.6% in 2010, and kept on increased by 143% in 2011. This huge increased short term debt mainly came from 616 million 5.35% Senior notes due 2012, 298 million 5.875% Senior notes due 2013, and 173 million 8.0% Senior debentures due 2012. The huge increase in short term debt in FY 2011 maybe part of the reason of the big increase in the cash and cash equivalent account.
2.1.2 Horizontal analysis of Income Statement
From table 2, we can see that net sales for 2011 totaled $26,405 million, compared to net sales of $25,003 million for 2010, an increase of $1,402 million or 5.6%. Part of this increase is due to an increase on the comparable store basis, and part of it is due to the 39.6% increases from the company's Internet businesses in 2011. The successive increase in the net sales in the three year trends shows that Macy’s continues to benefit from the successful execution of the My Macy's localization strategy. In 2011, the Gain on sale of properties, impairments, store closing costs and division consolidation costs account increased 200% over 2010. This is because Macy’s had a $54 million gain from the sale of store leases related to...
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