Opportunities:
- Market Share: Any gain Macy’s is able to make in market share will substantially benefit the company as only a slight gain could equate to millions in sales
- Dividend Growth: Since implementing their dividend program in 2003, Macy’s has consistently raised their dividend payouts, a trend which is highly anticipated to sustain into the future
- Growth in Store Count: The number of stores the company operates has decreased from 850 in 2009 to 842 in 2011, however with improving economic conditions in the United States, growth in store count presents an incredible opportunity for the company
- Innovative Product Offerings: Macy’s is consistently implementing new product lines to spark customer interest, and has recently started a loyalty program, and any further innovative product offerings could fuel sales growth
Threats:
- Growth in Operating Expenses: Over the past five years, operating expenses have outgrown revenues marginally, and further growth in operating expenses could lead to further margin contraction
- Decay in Consumer Confidence and Spending: When US economic conditions falter, consumer confidence and spending decay, and further decay in these vital statistics could pose a major threat to Macy’s core business
Competitors:
Major publicly traded competitors of Macy’s include Saks Inc (NYSE:SKS), J.C. Penney Company, Inc. (NYSE:JCP), Nordstrom, Inc. (NYSE:JWN), and Kohl’s Corporation (NYSE:KSS). All of these companies operate in the retail industry and compete directly with Macy’s. Saks is valued at $1.71 billion, does not pay out a dividend, and carries a price earnings ratio of 25.07. J.C. Penney is valued at $4.34 billion, does not pay out a dividend, and carries a negative price earnings ratio. Nordstrom is valued at $11.09 billion, pays out a dividend yielding 1.95%, and carries a price earnings ratio of 16.90. Kohl’s is valued at $10.66 billion, pays out a dividend yielding 2.76%, and carries a price earnings ratio of 10.65.
The Foolish Bottom Line:
Financially, Macy’s is relatively solid. The company possesses stable revenue figures, a growing dividend, and a positive free cash flow position. The company’s debt position is compensated through opportunities presented to the company in its future. While more stability may be found in Target or Wal-Mart, and more growth may be found in Costco and Amazon in the retail industry, Macy’s is a nice blend of stability and growth, and should perform in line with the market for years to come.
The article Is This One Star Investors Should Place in Their Portfolios? originally appeared on Fool.com and is written by Ryan Guenette.
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