MACY'S INC. Macy's sales for the first quarter of 2009 total $5.199 billion, down 9.5 percent from sales of $5.747 billion in the first 13 weeks of 2008. On a same store basis, Macy's, Inc.'s first quarter sales were down 9.0 percent. Online sales (macys.com and bloomingdales.com combined) were up 16.2 percent. Macy's operating loss totaled $114 million or 2.2 percent of sales for the quarter ended May 2, 2009, compared with operating income of $30 million or 0.5 percent of sales for the same period last year. On May 15, 2009, the board of directors of Macy's, Inc. declared a regular quarterly dividend of 5 cents per share on Macy's common stock. Terry J. Lundgren, Macy's chairman, president and chief executive officer, suggested, "We continue to successfully navigate the very difficult economic environment. Our first quarter sales were consistent with our initial expectations, while earnings and cash flow performance were better than expected. By the end of the first quarter, we completed rollout of our My Macy's localization initiative. We have entered the second quarter with our new organizational structure in place and expect to benefit from approximately $400 million of annual expense savings beginning in 2010 (and $250 million in the partial year of 2009). Meanwhile, we expect to see an improvement in sales trend from My Macy's beginning in the fourth quarter of 2009 and especially in spring 2010." On June 11, 2009, Macy's announced it would open two new Macy's stores in the Central Valley of California in the fall of 2009. Both are former Gottschalks locations for which Macy's submitted successful bids in the Gottschalks bankruptcy process. Macy's second quarter 2009 ended August 1 and showed an earnings drop of 90 percent to $7 million and a sales drop of 9.7 percent to $5.16 billion. For that quarter, Macy's said their sales of mattresses, furniture, and handbags remained very weak, while their sales of apparel, cosmetics, and children's clothing were up slightly. Due to reduced orders from Macy's, other retailers too are suffering. For example, Liz Claiborne considers Macy's to be its biggest customer. Liz Claiborne for the second quarter of 2009 showed a sales drop of 29 percent to $683.8 million and an earnings loss of $82.1 million. Macy's needs a clear strategic plan for the future. Basic Values Macy's has some well-published values intended to guide the behavior of all their employees, as follows: a. We subscribe to ethical business practices in every facet of our business. b. We will protect the interests of our shareholders. c. We will provide quality and value to our customers in all dealings. d. We will obey all laws. e. We will treat others as we want them to treat us. f. We will respect the rights and property of others. g. We will be good corporate citizens. Macy's believes that the timeless values that made our nation strong are the same values that make the company strong. These values are: a. A belief in the promise of the future with the energy and determination to get us there. b. A belief that our heritage mirrors the optimism, inclusion and integrity that provide for both stability and growth. c. A belief that taking advantage of the right opportunities will continue to lead us to success in all that we do. Organization Macy's has developed a new organizational strategy named "My Macy's" based on customer research and input from Macy's store managers, senior division executives, merchandise vendors, and industry experts. Merchandising Macy's strives to bring to customers niche brands and categories. The company has recently rolled out fresh, handmade cosmetics, soaps, and bath products from Lush. The recent use of robotic machines to sell iPods, iPod accessories, and other electronic products has been a very successful action plan. By 2008, private brands and labels represented about 19 percent of Macy's sales. Macy's has always been known as an innovator. They pioneered such revolutionary business practices as the one-price system (the same item was sold to every customer at one price), quoting specific prices for goods in newspaper advertising, introducing such items as the tea bag, the Idaho baked potato, and colored bath towels. The company was also the first retailer to hold a New York City liquor license. Macy's also piloted new food concepts in selected stores, many of which were developed from the Macy's Culinary Council. Several stores have recently launched quick-service concepts such as La Brea Baker shops and newly developed Taste Bars. Technology Macy's direct-to-consumer businesses, including Macys.com, continues to be the fastest growing part of the company. Two new 600,000-square-foot distributions centers in Portland, Tennessee, and Goodyear, Arizona, are part of a $300 million investment in direct-to-consumer technology and operations. Macy's recently began installing a network of 50,000 new registers and point-of-sale systems that will be fully in place by the end of 2010. New "smart registers" are allowing sales associates to handle complex tasks more simply. The supporting software for this system will enable multichannel retailing in the future. Sustainability Issues Macy's has made a commitment to making a meaningful difference in improving the natural environment. The company has been able to reduce its total energy consumption by nearly 10 percent over the past five years. They have begun hosting solar panels on 28 Macy's stores in California. In addition, their customer-oriented fund-raising programs in the spring of 2008 benefited such organizations as the National Park Foundation and the National Resources Defense Council. Through Macy's Rwanda Path to Peace Project, the company offers a collection of colorful baskets hand made by Rwandan widows who are survivors of that country's

civil war and genocide. The baskets provide a lifeline of sustainable income to these exceptional artisans while offering to their customers high-quality, unique baskets that are not available anywhere else. Many of Macy's new products are eco-friendly, such as Haven by Hotel Collection. These include products for the bed and bath such as organic cotton sheets and towels. Macy's has a stringent Vendor/Supplier Code of Conduct. This code sets out specific standards and requirements for any vendor doing business with the company. All of the company's vendors are required to sign written affirmations in which they agree to comply with the company's Code of Conduct. In addition to other requirements, the code requires Macy's vendors allow unannounced factory inspections for contractual compliance as well as compliance with child labor laws and regulations. Macy's has also adopted welfare-to-work programs with government and service organization partners in cities from coast to coast. The purpose of such programs is to provide training that will help welfare recipients gain employable skills and move into gainful employment. Macy's provides employment for many of the participants in these programs. Macy's encourages charitable giving and employee volunteerism at both the national and local levels. Contributions from the company and its charitable foundations totaled $35.7 million in fiscal 2007. The company matched more than $4 million in employee gifts to nonprofit organizations across the country. In addition, Macy's efforts resulted in an additional $42.7 million in contributions from employees and customer through United Way drives, their Thanks for Sharing holiday campaign, Shop for a Cause charity shopping days, Passport and Glamorama fashion events, and other programs. Advertising Macy's uses network and cable television, fashion magazines, and an increasing amount of digital and online media to provide for national brand advertising. They use a balanced level of promotional advertising and direct marketing. The Macy's Thanksgiving Day Parade has had a worldwide impact. The most recent parade had 3.5 million live spectators and a television audience of 50 million. Macy's recently launched a series of breakthrough brand ads featuring more than a dozen design celebrities behind unique merchandise sold in their stores and online. These celebrities ranged from Martha Stewart and Donald Trump to Usher, Jessica Simpson, Tyler Florence, Sean Combs, and Kenneth Cole. The campaign ads, which depict the celebrities interacting inside Macy's, are planned to continue into the future with new faces and themes. Financial Performance Macy's has adopted the following financial objectives: a. To accelerate comparable store sales growth. b. To continue to increase the company's profitability levels (earnings before interest, taxes, depreciation, and amortization) as a percentage of sales to a level of 14 percent to 15 percent. c. To effectively use excess cash flow through a combination of strategic growth opportunities and stock buybacks. d. To grow earnings per share while increasing return on gross investment. Competitors Macy's considers Dillard's, Inc., J.C. Penney Corporation, Inc., and Saks, Inc., to be its closest competitors (see Exhibit 6). As compared with its closest competitors in 2008, Macy's 167,000 employees were considerably more than Dillard's (33,433) and Saks' (10,860) and 12,000 more than J.C. Penney's. Macy's also leads in the area of total revenues with $24.89 billion as compared with Dillard's ($6.99 billion), J.C. Penney ($19.86 billion), and Saks ($3.03 billion). In terms of gross margin, Macy's also leads with 39.70 percent as compared with Dillard's 30.92 percent, and Saks's 32.14 percent. Penney's gross margin percentage is not available for comparison. A review of the net income of Macy's indicates that it had a loss of $4.80 billion in 2008, Dillard's lost $241.07 million, J.C. Penney had a positive net income of $1.18 billion, and Saks lost $122.76 million. U.S. Retail Clothing Industry in 2009 In an economic recession such as the 2007-2009 period of time, a comparison of same store year-to-year sales numbers becomes more important than in other economic periods. The January 2009 sales changes for same stores as compared to January 2008 revenues for selected retail clothing store. Conclusion Macy's press release of January 8, 2009, says the company was going to close 11 underperforming stores as indicated in Exhibit 7. Chairman Terry J. Lundgren commented on that revelation by suggesting, "These closings are part of our normal-course process to prune underperforming locations each year in order to maintain a healthy portfolio of stores. While new store growth has slowed in the current economy, our long-term strategy is to continue to selectively add new stores while closing those that are underperforming." A month later, a Wall Street Journal article on dated February 3, 2009, stated that Macy's intends to shed 7,000 jobs or 4 percent of its workforce. Macy's also is cutting its dividends by 62 percent, ending merit pay increases for executives, and slashing its 2009 capital-spending budget by another $100 million to $150 million. The original budget was $1 billion (Dodes, 2009). I consultant Howard Davidowitz suggests that "Chief executives of retailers with high debt levels are especially vulnerable." He pointed to Terry J. Lundren of Macy's as "someone who needs to make significant progress after poor 2008 results and the illtimed acquisition of May Company" (Bymes and McConnon, 2009). On a more positive level, Macy's corporate vision contains the following statements: "A belief in the promise of the future with the energy and determination to get us there; A belief that our heritage mirrors the optimism, inclusion and integrity that provide for both stability and growth; and A belief that taking advantage of the right opportunities will continue to lead us to success in all that we do." In lieu of the company's optimistic vision statement and the serious economic downturn in the economy of the United States, which resulted in the closing of 11 Macy's stores, Lundgren and the rest of the company leadership were faced with determining an appropriate strategy to avoid more layoffs and store closings. (Source: David, Fred R. 2011. Strategic Management: Concepts and Cases. Prentice Hall. http://www.mim.ac.mw)

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